Your Health Plan is the Latest Fiduciary Ticking Time bomb

The Consolidated Appropriations Act of 2021 (CAA) is the most significant compliance challenge employers have faced since the Affordable Care Act. New requirements are in effect now, including:

• Required review of plan contracts and removal of all “gag clauses,”
• Required determination of “reasonableness” of vendor fees and services,
• Required prescription drug reporting for plan years 2020, 2021, and 2022 (due Jan. 21, 2023), and
• Required analysis of parity between medical and mental health coverage.

Failing to comply with the requirements of the CAA leaves employers at risk of fines and class-action lawsuits. But most employers are still in the dark, believe their broker or TPA will handle compliance on their behalf, or that it’s simply “no big deal.”

Make no mistake. This is a very big deal, and the Department of Labor (DOL) and the Department of Health and Human Services (HHS) are taking these requirements very seriously.

Let’s look at what we have seen just in the last few months:

• DOL audits - The DOL reviewed over 200 mental health parity analyses. NONE of the analyses reviewed were found to meet the requirements.
• Report submitted to Congress - The DOL & HHS submitted a joint report to Congress suggesting health plans and health insurance issuers are failing to deliver parity for mental health and substance-use disorder benefits to those they cover.
• DOL focus - The House Committee on Education and Labor issued a letter to the DOL stating unequivocally that Congress intended for disclosure of compensation to apply to PBMs and TPAs and is asking the DOL to issue guidance clarifying this.  
• Grace Period but not much - The CAA Prescription Drug Reports deadline has been provided a grace period until January 31, 2023.   
• Lawsuit - In December, a class-action lawsuit accused UnitedHealthcare Group of systematically underpaying benefits for care received from out-of-network healthcare providers. According to the complaint, this practice violates the terms of their plans and breaches United’s fiduciary obligations under ERISA.
• Lawsuit - In December, self-funded plans sued Anthem, alleging overcharging and other ERISA violations.

Ignoring these new requirements will cost Fiduciaries and vendors time and money. Remember what happened in the retirement space:

In 2006, Tussey v. ABB, the first “excessive fees” case, changed views of fiduciary duties regarding fees. The retirement plan industry moved in a unified way to press for reductions in service provider fees, opt for lower-cost share classes, and insist upon greater transparency of all service providers. But the information uncovered triggered a wave of class action lawsuits filed against providers, corporations, and not-for-profits, alleging excessive plan fees lack of process for monitoring and negotiations with service providers.  

Take a look at these settlement sizes:

• Citigroup (2018) $6.9 million
• Allianz (2018) $12 million
• American Airlines (2017) - $22 million
• Northrop Grumman (2017) - $16.75 million
• Mass Mutual (2016) - $30.9 million
• Novant Health (2016) - $32 million
• Boeing (2015) - $57 million
• Ameriprise (2015) - $27.5 million
• Lockheed (2015) - $62 million
• University of Chicago - $6.5 million  
• Duke University – $10.5 million

And the list goes on to this day. The time for change is now. The time for uncomfortable conversations is now. Change is here, like it or not. All plan sponsors should immediately implement a fiduciary status to take control of their health benefits plans and limit liability. As Eleanor Roosevelt famously said, “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”

Jamie Greenleaf, AIF, CBFA, CHSA, is Managing Director/Founder of TILT.

Opinions expressed are those of the authors, and do not necessarily reflect the views of PSCA or its members.