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Health plan fiduciary breaches persist under CAA

The Consolidated Appropriations Act of 2021 (CAA) is the most significant compliance challenge employers have faced since the Affordable Care Act. Benefit advisers who serve the health and welfare side of our industry no doubt will need to continue paying close attention to this landmark legislation on behalf of their employer clients. 

New requirements are now in effect. They include the review of plan contracts and removal of all “gag clauses;” determination of “reasonableness” for vendor fees and services; prescription drug reporting for plan years 2020, 2021 and 2022; and analysis of parity between medical and mental health coverage. 

Failing to comply with these requirements leaves employers at risk for incurring fines and facing class-action lawsuits. But most organizations are still in the dark, believing 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 Department of Health and Human Services (HHS) are taking these requirements very seriously. Just look at what we have seen just in the past few months:

  • DOL audits. Of the more than 200 mental health parity analyses that have been reviewed, none were found to meet the CAA requirements.
  • Congressional report. DOL and 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 pharmacy benefit managers and third-party administrators. It is asking the DOL to issue guidance clarifying this issue.  
  • Short grace period. The CAA prescription drug reports deadline has been provided a brief grace period ending on January 31, 2023.   
  • Litigation. A class-action lawsuit filed in December 2022 accused UnitedHealthcare Group of systematically underpaying benefits for care received from out-of-network healthcare providers. This practice violates the terms of their plans and breaches the carrier’s fiduciary obligations under ERISA, according to the complaint. That same month, 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 with noncompliance in the retirement space? 

In 2006, the first “excessive fees” case (Tussey v. ABB) altered the view of fiduciary duties as they relate to 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 nonprofits, alleging excessive plan fees, lack of process for monitoring and negotiations with service providers. 

Take a look at these eye-popping settlement sizes from highest to lowest: Lockheed (2015) $62 million, Boeing (2015) $57 million, Novant Health (2016) $32 million, Mass Mutual (2016) $30.9 million, Ameriprise (2015) $27.5 million, American Airlines (2017) $22 million, Northrop, Grumman (2017) $16.75 million, Allianz (2018) $12 million, Duke University $10.5 million, Citigroup (2018) $6.9 million and University of Chicago $6.5 million.  

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 once wisely said: “Learn from the mistakes of others. You can’t live long enough to make them all yourself.”

By: Jamie Greenleaf, Co-Founder, Fiduciary In A Box

Published in Employee Benefits News, January 25, 2023

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