New Health Plan Fee Disclosure Law: Opportunity or Threat?

This #MemberInsights article is authored by Care2Care International. 

“Health benefits brokers are trusted advisers to employers, who sponsor health plans for about 150 million Americans. But ProPublica showed in 2019 how the insurance industry influences the consultants behind the scenes with cash and gifts — from six-figure bonuses to swanky island getaways.” Marshall Allen, Propublica.org, 2021

Intended as a game-changer, the newly adopted section 201 of the CAA (Consolidated Appropriations Act) amends the Employee Retirement Income Security Act (ERISA) to require employer-sponsored health plans (“plans”) to have access to certain cost and quality of care information, including specific claims data that shows costs related to claims, and also precludes restrictions in provider network contracts that prevent plans from accessing provider-specific cost and quality of care data.

The rule requires that any compensation paid to third party providers:

- brokers,

- consultants,

- TPA (third-party administrators),

- PBM (Pharmacy Benefits managers),

- Various health services providers and vendors: Disease management, transparency solutions, etc.,

must be disclosed to the plan and by the plan,

These disclosures to the plan must include, among other things:

• a description of services to the plan fiduciary
• all compensation, direct and indirect.

The disclosures must take place at the time the employer enters into the agreement with the broker or upon its renewal.

The law is a double-edged sword:

1. Specialists see it as a really powerful tool in the hands of employers to regain power over their health plan costs: too often, information on indirect payments made by insurers, or by providers to brokers or consultants, is not disclosed. The client may consider that their adviser is working in the client’s interest, while hidden incentives provided to these professionals lead them to optimize their revenues at the expense of the client, the plan sponsor.

In future articles, we will come back to the topic and provide shocking examples in our sector, prescription drug access and procurement.

2. But it also may become a source of litigation for the employer in its quality of health plan fiduciary: indeed, updated DOL regulations make clear that Section 408(b)(2) of ERISA, otherwise known as the “reasonable fee rule” now applies to health plans, not just retirement plans.

Professionals are sounding alarmed on the consequences failure to engage in meaningful review of Fee Disclosures could have for the employer: it could result in a “Prohibited Transaction” which carries serious consequences including civil penalties, personal liability, loss of qualified status under the Internal Revenue Code, and exposure to class actions the size of which will rival or surpass the 401(k) class action litigation wave of late.

To mitigate these risks, employers and plan fiduciaries should engage in a complete and systematic process, requesting (in some cases providers refuse to hand them over!) and reviewing all of their administrative service agreements related to their health plan.

Employers will have to use these agreements in their own interest, to lower costs (health plans represent on average 20% of the payroll) while protecting themselves from serious, potential legal threats.