PLANSPONSOR Roadmap: A CAA Overview

Since the passage of the Consolidated Appropriations Act of 2021, and as more litigation related to employer health plans continues, plan sponsors are becoming more aware of the full scope of their fiduciary responsibilities.

Speakers at Wednesday’s PLANSPONSOR Roadmap: Health Plan Fiduciary Duties livestream discussed some of the new regulations under the CAA, emphasizing the need for plan sponsors to monitor their pharmacy benefit managers and the third-party administrators involved with managing their health plans.

Readers can access the recording of this week’s event and register for the next sessions in the series.

“Plan sponsors have been fiduciaries of their health plan since day one,” said Julie Selesnick, a senior counsel at Berger Montague. “There just hasn’t been a clear understanding of how to be a good fiduciary, because there were no tools in place [before the CAA].”

Requirements Under the CAA

Selesnick explained that under the CAA, plan sponsors now need to attest to the removal of any gag clauses from their contracts with their PBM or TPA. A gag clause is any provision that either directly or indirectly restricts the plan from having access to deidentified medical claims data.

“What’s complicated for plan sponsors and other plan fiduciaries to navigate is that it is on [them] to make sure there’s no gag clauses, but there is no real requirement that the service provider assist you in this,” Selesnick said. “It’s difficult to be a good fiduciary right now because you don’t have a lot of leverage to get other service providers to cooperate.”

Barbara Delaney, a principal in Stone Street / Renaissance Benefit Advisors, a member firm of Global Retirement Partners LLC, compared the duty of plan sponsors to gather data related to their health plans to the duty to gather data from the plan’s recordkeeper on the 401(k) side.

Selesnick added that the CAA amended Section 408(b)(2) of the Employee Retirement Income Security Act to mandate that service providers to group health plans disclose direct and indirect compensation to plan fiduciaries, in an effort to increase fee transparency.

“Before this, it’s been virtually impossible for health plan sponsors and other fiduciaries to determine what they’re paying their vendors. … That would never fly in any other world,” Selesnick said. “But even now, it’s still unclear in many cases what you’re paying, because not all vendors are complying.”

It is particularly difficult for fully insured small plan sponsors—those with fewer than 100 employees—to access their health plan data, according to Selesnick. But for plans with more than 100 employees, she said it should be easier to access the data—both for fully insured and self-funded plans.

Jeffrey Cullen, CEO of Strategic Retirement Partners, added that this is also a state-by-state issue. Cullen said he works with plans that have close to 1,000 employees that are still fully insured because of the nature of what is available in the particular state, or states, in which they operate.

“With most states being a monopoly, duopoly or triopoly [of health insurance providers], it can be really difficult sometimes for employers to find a competitive environment,” he said.

Cullen said plan sponsors are at a “fork in the road” and need to decide whether they will embrace being a fiduciary and keeping a close eye on documentation, fee transparency and reasonableness. He said plans need to apply the same amount of scrutiny they would on the 401(k) side as they do to their self-insured health care plan.

For fully insured plans, Cullen said sponsors need to demonstrate to regulators that they are trying to access their health plan data, even though they are unlikely to get it. As a result, Cullen expects that a lot of fully insured employers will opt out of the current system, as a variety of insurance solutions are coming to market to supply the employers looking for alternatives.

Increased Litigation

As a result of the CAA, Selesnick said there are two types of litigation that are increasing: lawsuits brought by plans against insurance carriers and PBMs and lawsuits brought by participants against plan fiduciaries. She said there are also several cases in which plans are suing their TPA or PBM just to obtain their claims data.

Currently, there are several lawsuits against Aetna and Anthem Blue Cross Blue Shield over refusing to provide claims data.

The four lawsuits that have been filed against plan sponsors include those against Johnson & Johnson, Wells Fargo, JPMorgan and the Mayo Clinic. All of these lawsuits, except the one targeting the Mayo Clinic, accuse fiduciaries of mismanaging the PBM and not knowing what the company is paying to a broker receiving indirect compensation.

However, Selesnick said these lawsuits have run into many issues of standing, as the J&J and Wells Fargo cases have been dismissed. A second amended complaint for the J&J case has been filed.

The Mayo Clinic lawsuit is one Selesnick said plan sponsors should be “most worried about,” because it deals with a TPA not providing coverage in the way outlined by the plan document.

It is unclear how President Donald Trump’s nominee to head the Employee Benefits Security Administration, Daniel Aronowitz, an ERISA litigation expert, will impact enforcement of health care fiduciary rules.

Cullen said an increased emphasis on fee transparency is leading to the debut of more innovative products that can help plans decipher their contracts with TPAs and PBMs. For example, he said there are multiple artificial intelligence engines that can identify changes that plan sponsors can make with their PBM to lower the cost of covered prescription drugs.

He said there are also AI engines that can analyze if a claim makes sense, which he said is significant because claims in the U.S. are automatically adjudicated, meaning there is neither a human nor AI reviewing these claims for accuracy.

Overall, whether plans are fully insured or self-funded, Selenick said they need to understand who their fiduciaries are, obtain a fiduciary liability insurance policy and come up with a process by which fiduciary decisions are made. She emphasized that fiduciary training on the health plan side is extremely important and that advisers should be helping sponsors renegotiate their contracts and vet their vendors.