Purchaser Business Group on Health Receives Funding to Launch CAA Data Demonstration Project

June 18th, 2024
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With newly secured funding, PBGH is now able to launch its Consolidated Appropriations Act (CAA) Data Demonstration Project.

This is a first initiative of its kind, combining CAA hospital and payer datasets with provider quality metrics with specific employer demographic and claims data from five employers in 10 geographic markets.

Key reasons why employers are embarking on this initiative include: 1) informing upcoming carrier and network strategy and selection, 2) carrier performance effectiveness and accountability, 3) incorporating quality measurement into accountability, and 4) fiduciary due diligence.

With this project, PBGH will:

Participating employers will receive the analytics report with findings and recommendations, cost/price benchmarks and recommended application strategies.

The expected timeline for final deliverables is 9-12 months, with potential preliminary insights in six months.

Geographic markets include: Puget Sound, Washington; Oregon; Northern and Southern California; Phoenix, Arizona; Dallas, Texas; Denver, Colorado; Atlanta, Georgia; St. Louis, Missouri; and Northern New Jersey and New York.

All interested PBGH members can participate by contacting Won Andersen.

4 Steps for Large Employers to Meet Fiduciary Duties and Mitigate Legal Risk

May 22nd, 2023
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The Consolidated Appropriations Act (CAA) has created both opportunities and risks for employers when it comes to overseeing employee health benefits.

The CAA finally gives employers access to the kinds of cost-benefit data long available with virtually every other business decision. The law equips them to better perform their role as stewards of company and employee finances by assessing the value of the health care services they purchase for employees. Over time, these new insights will likely set in motion an unprecedented shift in the health care market’s balance of power. For that reason, it’s no surprise that vendor compliance with these new pricing, contractual and compensation disclosure mandates has been fragmented, incomplete or non-existent.

Employers must now take steps to develop rigorous fiduciary processes around health care purchasing. Consistently demonstrating good faith efforts to comply with the CAA will lead toward a safe harbor that should mitigate future legal exposure and adverse compliance action. Equally important, employer expectations will compel vendors to either alter their behavior or risk losing important accounts and business.

The challenge employers face should not be underestimated. ERISA makes very clear the liability for CAA compliance ultimately rests with the employer and its designated “plan fiduciary.” This may be an individual plan sponsor (who retains personal fiduciary liability), an internal committee, the board of directors or some combination of these. Although vendors will be instrumental in assisting employers and plan fiduciaries in meeting the CAA’s requirements, employers cannot delegate their fiduciary obligations away and must take steps to engage the CAA head on.

4 Steps Your Organization Can Take to Help Protect Itself from Legal Exposure

There are four steps employers can take today to demonstrate good-faith compliance with the CAA’s fiduciary obligations and mitigate downstream legal exposure and consequences.

1) Develop processes and criteria for evaluating vendor performance. Under ERISA, plan fiduciaries must run their health plan (including pharmacy, vision and dental benefits) solely in the interest of employees and their dependents with the exclusive purpose of providing benefits. They must also avoid conflicts of interest and show the plan pays only reasonable expenses. Because the CAA makes available new sets of transparency information, plan sponsors will find their opportunity and duty to oversee vendors has increased.

Employers must now develop and document a process for monitoring vendor performance for value and alignment with the health plan’s interests. This monitoring process should include regular review of the plan’s vendors to determine whether fees and claims are reasonable. Employers should benchmark their vendors’ compensation against others in the market and should periodically review their current vendors to assess reasonableness and examine the continued suitability of these relationships.

2) Request vendor compensation information. The CAA requires health plan fiduciaries to request details on the direct and indirect compensation their insurance brokers, consultants, pharmacy benefit managers and third-party administrators expect to receive. These compensation disclosures should include a detailed explanation of the services provided and direct and indirect compensation, including bonuses, referral fees, rebates and commissions, as well as the source of that compensation.

If you can’t understand a compensation disclosure document, push until the specifics are clear. Beware of ambiguous phrases like “we may or may not receive compensation.” Ensure the disclosure is signed not just by a representative of the firm, but also by someone in senior management who is able to authoritatively attest to its accuracy.

If the vendor refuses to provide the information or fails to do so within 90 days, employers are required to notify the Department of Labor and terminate the contract. Similarly, if the compensation is excessive or “unreasonable” or if it implies conflicts of interest, the vendor relationship would become a “prohibited transaction” under ERISA that the employer could not lawfully continue.

3) Work with legal counsel to ensure all gag clauses are removed from your service provider contracts. The CAA explicitly bans the presence of “gag clauses” in health plan service provider contracts, which are contractual terms that would restrict an employer’s access or ability to share health care cost and quality data. Prior to the CAA, these were extremely commonplace. Now, contracts entered into after December 27, 2020 cannot legally contain them.

Earlier this year, CMS announced employers will need to submit on December 31, 2023 their first attestation of having removed all gag clauses in their contracts. Moving forward, employers will need to attest annually.

Employers need to take great care in ensuring, with expert legal counsel, that they are compliant with this requirement. More importantly, they should view the CAA’s prohibition on gag clauses as an opportunity to access their full, de-identified claims data, including allowed amounts. Many employers have struggled to receive full information before and had to make health care purchasing decisions in the dark. The CAA has provided the light employers need to access and analyze their data.

4) Request plan-level prescription drug data collection (RxDC) data from your pharmacy benefit manager (PBM). The CAA mandates yearly submission of information on prescription drugs and health care spending, known as RxDC reporting. Often, this data is gathered and submitted in large part by a plan’s third-party administrator and PBM without the employer ever seeing the information.

However, RxDC data, originating from PBMs, contains potentially valuable information for an employer. Specifically, it includes novel information on the financial impact of rebates, fees and other drug manufacturer payments on the health plan and its impact on premiums and employee out-of-pocket costs.

Employers should request their plan-level RxDC data. If your PBM declines to provide it to you, document that you attempted to obtain it. If they do provide it, enlist the help of an independent, third-party pharmacy consultant to analyze the rebate information for new insights on how it affects your plan’s premiums and your employees’ out-of-pocket expenses.

What’s Next for Employers

As the post-CAA health care environment solidifies, new third-party intermediaries will undoubtedly emerge to provide employers with new tools, actionable insight and comparative cost and compensation data around the full spectrum of health care services, from hospitals to consultants to PBMs.

In the meantime, organizations must move forward as effectively as they can in uncovering baseline cost and compensation data. Ultimately, every step toward scrutinizing and defining value in the organization’s health plan is an exercise in fiduciary prudence and sound judgment that ensures organizational resources are used in the most effective way possible.

 

This content is educational in nature and should not be taken as legal advice. Consult with your legal counsel before making any decisions for your health plan, especially those related to CAA compliance.

A CFO’s Guide to Health Plan Fiduciary Leadership

January 17th, 2023
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Recent passage and implementation of the Consolidated Appropriations Act (CAA) of 2021 creates new risks and opportunities for employers who self-insure their health benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA).

What Employers Need to Know

The CAA mandates employer access to new and critically important insights into the prices they’re paying for employee health care services – details they have been unable to previously obtain from vendors to whom they pay millions of dollars each year to negotiate on their behalf. Finally, employers can evaluate the cost and quality of services they are purchasing from providers and other vendors and make informed procurement decisions. In fact, the law requires employers to demonstrate that the health care services they buy for their employees are cost-effective, high-quality and meet mental health parity and pharmacy benefit requirements.

This means that employers must take steps to establish oversight procedures and processes to document their efforts to comply with the CAA as fiduciaries, similar to the governance practices employers have already established for their 401(k) and retirement plans.

Implementing an effective health plan oversight and audit framework, with documented procurement processes, can substantially reduce corporate exposure for companies and individual directors, officers and employees. Many employers currently lack adequate controls in their existing service agreements, have historically tolerated unreasonably high fees and costs and often rely upon financially conflicted intermediaries for advice.

The CFO’s Role

It is because of these systemic barriers to compliance that CFO leadership is particularly needed to guide corrective action. Compliance may very likely require companies to adopt new business practices, amend existing health benefit contracts and ensure insurance policies for Directors and Officers cover claims involving employee health plans.

The heightened fiduciary risk of being a health plan manager is occurring at a time of increasing health plan expenses, economic pressures, workforce recruitment and retention challenges and a seemingly insatiable employee demand for immediate, personalized solutions that foster overall well-being. CFOs who embrace a health plan fiduciary framework to mitigate litigation risk may find that compliance opens new opportunities to reduce wasteful health care spending, improve predictability and enable better support for the health and wellbeing of their employees and families.

An Opportunity to Address Workforce Health Challenges

The same health plan data that can help CFOs mitigate fiduciary risk can also unlock opportunities for human resource and benefit leaders to better address workforce health challenges and manage delegated services and vendors. Fiduciary leadership that is aligned across finance, human resources and benefit teams can catalyze a transformation of employee health benefits from a liability to a valuable, strategic asset.

Click here for our guide to establishing a strategic fiduciary framework to enhance the value of employee health benefits.