The new brokerage compensation transparency rules in the Consolidated Appropriations Act have gotten far less attention than they deserve. But the same can be said about the proverbial elephant in the room: requirements that impose new fiduciary obligations on employers.
It is in no way an exaggeration to describe these changes as seismic, a major upheaval in the employee-benefits world.
We all know that employers with 401(k) plans have a fiduciary obligation to look out for their employees’ best interest when it comes to their retirement plans. Now, under the CAA, employers must bring that same, heightened level of attention and care to their group health plans.
It’s a new duty imposed under the CAA yet few employers have gotten their hands around it, let alone stopped to understand just what they’re now supposed to do and how to stay out of the Department of Labor’s or IRS’s crosshairs.
Ignorance of the law is, of course, never an excuse and so here, simply stated, is what every employer with a company health plan needs to know:
As an employer, it’s now your responsibility to ensure your health plan is cost-effective, offers quality care, and meets new mental health parity and pharmacy benefit requirements contained in the CAA.
More specifically, the CAA requires:
- The removal of gag clauses from brokerage and other service provider contracts, including health plans, third party administrators, consultants, pharmacy benefits managers, and any other entity involved in health benefits. The point of this? To give employers access to claims data – something they’ve clamored to have for years – so that they ascertain whether employee costs related to claims are being expended in an efficient manner, and so that waste can be eliminated.
- Employers to report what their plans are spending on health care services, including hospital costs and the top 50 prescription drugs most commonly dispensed to their enrollees.
- Disclosure of direct and indirect compensation from all service providers, so that any potential hidden incentive arrangements between brokers and plans, or Pharmacy Benefits Managers and drug companies are accounted for.
- Parity between mental health and substance-use disorder copay requirements and medical health benefits.
That’s a lot, we know. But, as we’ve noted before in our CAA-related communications, falling short on any score leaves you vulnerable to government fines and, worse yet, the possibility of class-action litigation.
So, what to do next?
If you’re a company owner with a health plan, part of your new fiduciary duty requires you to certify this year that you’ve put into place a process to understand and fully report on the details of your benefits program and prove you are working in the best interest of plan enrollees. To do all that, you’ll need to have a rigorous procurement process in place.
Putting this off another moment is not an option.
The Mahoney Group is one of the largest independent commercial insurance and employee benefits brokerages in the U.S. For more information, contact us online or call 877-440-3304.
This article is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.