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The Consolidated Appropriations Act of 2021 (CAA ’21) has caused quite astir, making it one of the biggest health plan challenges for employers since the passage of the Affordable Care Act.
Under the CAA ’21, the Transparency in Coverage rule, and related Department of Labor (DOL) guidance, employers are now required to report drug pricing to governmental regulators, account for pricing when
shopping for employee’s health care solutions and monitor both direct and indirect health plan broker compensation. These requirements have increased employers’ fiduciary responsibilities, resulting in a noticeable uptick in litigation.
Increased fiduciary responsibilities may remind employers of the Pension Protection Act of 2006 (PPA) when transparency in retirement plans became paramount – followed by hundreds of court cases over the transparency and reasonableness of plan fees. Until this day, these retirement plan cases show no signs of slowing down.
This transparency transition – along with the increased fiduciary responsibilities – is now occurring on the health plan side, with the fiduciary buck stopping with the employer. In fact, a class-action plaintiff’s attorney who pioneered much of the 401(k) and 403(b) plan fee litigation is now looking to health plans, as reported by the National Association of Plan Advisors (NAPA).
Recent health plan claims asserted in courts have included:
- A breach of fiduciary duty by allowing a benefits consultant to take undisclosed commissions from the insurance company.
- A breach of fiduciary duty where the claims administrator underpaid benefits for health care received from out-of-network providers.
- A breach of duty from “hidden,” undisclosed, or unreasonable fees.
- A breach of fiduciary duty for failing to disclose certain payment data according to law.
- A breach of fiduciary duty for the mismanagement of claims.
Health plan fiduciary cases resulting from the CAA ’21 are just now being filed in courts nationwide. So, at this point, it’s not clear if and how many of these fiduciary claims have merit.
However, with the health plan environment changing legislatively and potentially in the courts, employers should keep four best practices in mind.
- Understand the plan’s fees and charges, determining whether they are reasonable for the services provided in return.
- Adopt formal governance processes and procedures for the health plan, such as conducting periodic requests for proposal for providers and vendors, auditing claims, and monitoring third-party providers.
- Review the plan’s third-party administrators and claims administrators, analyzing the administrator’s network adequacy, service quality, and employee satisfaction, among others.
- Understand the contractual obligations and protections between the employer and any third-party vendor, including fee disclosures, machine-readable files, and direct or indirect consultant fee disclosures.
While good fiduciary governance is always a critical element of an employer’s fiduciary responsibilities, employers should also keep abreast of the many changes in this area – adjusting their governance as necessary.
This information has been prepared for UBA by Fisher & Phillips LLP. It is general information and provided for educational purposes only. It is not intended to provide legal advice. You should not act on this information without consulting legal counsel or other knowledgeable advisors.