April 9, 1995
U.S. Asst. Attorney Manvin Mayell
100 Church Street
New York, New York 10007
RE: Mason Tenders District Council of greater New York
Inclosed are the Title lll tapes that I have told you about. The two tapes from the Frontier Coffee Shop are quite impaired, but there is enough to be of assistance. I believe that all tapes can be enhanced and they mention of who would be the recipient of kickbacks.
I also wish to point out a procedure that should be implemented because it will lead to opening up of schemes involving Pagano Et Al.
As we both know the Welfare Fund has been managed abusively and not to the benefit of the members for whom the plan was established.
It would be quite easy to investigate the Fund and point out the various illegal schemes as well as the perpetrators.
Not only will any in-depth study be an asset to additional action. It will save the members millions of dollars and stop the LCN from its continued benefit.
1. Abusive Practices
In many of the jointly administered H&W Plans, particularly where the union officials have complete control over all the administrative practices. In well run programs this makes sense and can be very efficient. However just the opposite occurs should union officials look at the H&W Plan as a source for intimidation, nepotism, or financial gain. These abusive practices may surface in any of a number of different ways:
A. Billing Practices to Participating Employers:
Overcharging for each of the insurance coverage’s available through the H&W Fund under the guise of having to “cover the union office administrative expense.”
Including an actual “administrative fee” add-on that goes far beyond the actual expenses to administer the H&W Program.
Kiting eligibility lists and requiring employer payments for members who are ineligible and/or terminated.
In high turn-over situations, skewering eligibility rules to require payments for members who have not met coverage eligibility requirements yet for whom premium payments are requested.
In collusion with contractors, to bill the contractor for phantom union members in return for easing of work rules, etc.
B. Payment to Insurance Companies
Chronic overdue payments to insurance companies (being 60-90-120 days overdue in paying premiums and either using the float or the actual premiums for purposes other than which they were intended) - particularly when employers have been required to pay on time or be subject to penalties.
One of the more common practices that might be found is the under reporting of the number of union members who should be covered under the plan. There are a number of ways to disguise this practice and, at the same time continue to have claims paid.
Falsifying termination transactions in order to receive premium credits.
C. Payments from Insurance Companies
With a little imagination, fraudulent claims can be submitted to the insurance company with the actual claims being paid to phantom members.
In lieu of phantom members, claims may be arranged to be paid to actual members without the members knowledge and/or receipt of the claim check.
Etc. - You name it - it has been done when it comes to submitting fraudulent claims.
D. Claim Payments in a Self Funded Plan
Whatever might occur as described in C (above) you can double or triple with the opportunities that a Self Funded Plan would present.
E. Eligibility Practices - Hour (reserve) Bank Administration
In addition to phantom employees, there are situations where ineligible members (relatives, friends, employees in separate businesses, etc.) show up on an employers billing. This means that claims are being paid to persons who are not members of the union - but using union funds and resources to do so.
Hour (reserve) Bank Administration can be very complex and lead to difficulty in nailing down abusive practices. Most plans are run on a premium hours per year in order to maintain full coverage with quarterly eligibility requirements, etc. - leaving lots of room for imaginative ways to generate hidden financial gain. It would take a separate page just to list the ways an hour bank can be manipulated.
F. Provider Collusion
We are aware of the abuses in the Workers Comp. Arena. If these same doctors and other providers have relationships with the union officials running a fund, anything can and usually does happen. Using a Third Party Administrator or insurance company would certainly curb some of these abuses. Provided of course that they have not been contaminated.
2. Union Office Employees Handling the Claim Paying Function
Today, it really isn’t necessary for the union office to get involved in the payment of claims. Whether they actually process and pay the claims or whether they act as a conduit in helping to fill out the forms, that just isn’t the real world anymore. Some of the well managed funds provide the services as an additional benefit for the union members in that they can check at the “office” if they have any questions and it helps the union promote their presence and justify their dues. While it is really not cost efficient to do this, they attempt to justify the practice. In this computer world we live in, this practice can still be accomplished via a modem and one terminal.
Because in this day and age most claim processing does not require a claim form be completed and submitted with each bill being sent to the insurance company or a TPA providing the “assistance” isn’t necessary. At most, one claim form per year may be required (primarily to check (COB information), but beyond that, the claim handling function is done on a “direct” basis. This means the healthcare provides as well as the union member and/ or provider would submit bills directly to the TPA or insurance company. Most any of the administrators now provide toll free #800 service in order to:
Allow the medical care providers to verify union member eligibility and current benefit levels.
Permit union members to have access to the claim handling staff in order to have their insurance questions answered.
Obviously, using a TPA or insurance company could eliminate the need for having anything but a skeleton staff available in the union office to assist with major claim problems. This would eliminate the opportunity for the union to charge participating contractors any “add-ons” to the premiums in order to pay for the benefit fund office expenses.
A. Quality of Administration
There are many areas where a TPA or an insurance company is much more qualified to handle the administration of claims for the union members then having the union office hire and train employees to pay claims. If the benefits are insured through an insurance company there is at least some form of audit and monitoring of claim paying practices. If the plan is self funded, “anything can happen:! Some of the areas where non-professional claim payers would leave something to be desired are:
COB Administration- presuming the plan has a COB included (some don’t-I’ll cover that below), tight administration of this provision saves 4% - 5% of claim dollars. It is very common for the insurance industry to pick up on plans that are lax in administering COB by having them go ahead and pay benefits first, with the other carrier always paying second. I have seen this happen time and again which results in claim dollars being needlessly spent by the plan when the spouse’s employer’s plan should be paying benefits on that spouse and/or children.
UCR Administration - While well run self claim funds have made arrangements to secure the current guidelines for charges from providers through such sources as HIAA, etc., many funds just process the funds as they roll in. Without strict guidelines and practices in place for handling charges that are over the reasonable and customary amount, substantial claim dollars can be wastefully spent.
Hospital Bill Audits - Depending on how much nepotism was involved in the hiring of the people handling claims, it is probable that, few if any of them, would be qualified to audit a hospital bill for duplicate and erroneous charges. Because of the magnitude of the hospital bill, many claim dollars may be wasted without review of the charges.
Provider Billing Practices- In today’s sophisticated world, the billing clears in doctor’s offices go to seminars in order to find inventive ways to bill doctor’s patients and increase the doctor’s revenues. In addition to submitting duplicate bills (many of which get paid) they will “unbundle” what is normally a single procedure and payable as such, then submit bills for three or four procedures - sometimes doubling or tripling the amount that should be charged. Without qualified claim personnel or sophisticated computer software to uncover these practices, many claim dollars are going into the provider’s pocket instead of remaining in the H&W Fund where they belong.
Working it Out” for a friend - In many cases, claims that should not be paid find their way through the system when someone in the fund office is able to give an assist. When it is a self funded plan, it really makes it very easy to accomplish this favor.
Plan Design- Managed Care Opportunities
Both of these elements can present huge savings to a H&W Fund - even a well run fund without any abuses going on. In the real world it is very common to hear the words “Oh? you have coverage in the XYZ Union Plan? Everything is covered - so don’t worry about it.”
A. Plan design - when it comes to plan design we just need to start at the basics and review:
Does the plan have Coordination of Benefits (COB)?
Does the Plan contain wording limiting payments of charges to the usual, customary and reasonable (UCR) amounts?
Are cost containment features included? Such as:
Precertification - Are members required to precertify non- emergency hospital stays?
Continued Stay Review - Are the lengths of hospital stays being carefully monitored?
Is large case management in place?
Having these utilization review features included in the plan can present huge claim dollar savings to the H&W Fund.
Managed Care Opportunities
Another area of substantial savings for any H&W Fund is for the membership to secure services through providers who agree to discount their services to the Fund. In other words - Managed Care. Unfortunately, whether the “managed care” words are used in discussing a H&W Fund many members respond “you aren’t going to limit the choice of places and doctors with whom I can get medical services, are You?” As you are aware, in many benefit fund negotiations this becomes the main focal point of the negotiating process. In reality, managed care can be implemented in an H&W Plan without limiting the choice of providers. This can be done through contracting directly with the hospitals that are utilized by the membership or by implementing a hospital network on a sub-rosa basis meaning when members go to the hospital he or she prefers but substantial discounts for the Fund can occur if arrangements have been made. In most cases 50-60% of the claim dollars spent in a H&W medical plan are hospital charges, real savings can obviously, occur for the fund using this invisible approach.
It is more difficult to accomplish this approach on the physician’s side without getting into “networks” but there are many ways to encourage the members to use a network doctor “97% of doctors belong to networks today” - Identifying network savings on a per member basis and having the fund increase benefits or return the savings to wages would obviously benefit the Trustee’s standing with the membership. It reality the fund would save close to 50% of doctor cost by implementing this procedure.
Manvin, as you can see there are many opportunities in reviewing the practices of the Mason Tenders H&W Fund that will produce substantial savings in order to keep the dollars in the Fund for the benefit and use of the members - not the LCN.
Keep in mind that a review of the H&W Fund, as well as the Pension Fund, will provide you and the other investigators with the opportunity to identify the illegal practices and those involved.
I also want to point out that when the Teamsters International Union and Local 54 of the Hotel Restaurant workers Union were placed under Trusteeship. Little if any was done with the H&W Fund. Those reaping the rewards of illegally siphoning off millions of dollars, are still raping many of those Local’s.
One last area in which I have seen some abusive practices takes place is in the actual awarding of the H&W Fund insurance contracts. By promising to place the group insurance benefits with a particular insurance company, some of the trustees in an H&W Fund have used this as a vehicle to either force an insurance company or, at the least, entice them into providing other coverage’s on a very favorable basis.
As you are aware, bid bonds, and completion bonds are the heart and soul of the construction industry. Many favorable bonding contracts have been issued when an insurance company has been told they will have opportunities for larger margins when arrangements will be made for them to provide the group insurance benefits in the H&W Fund.
The actual cost of identifying these practices and correcting the abuses does not have to cost the fund one dime, any consulting cost can out of savings.
If you have any questions about the types or this H&W Fund recommendation, please feel free to contact me.
Ronald M. Fino