AH052 - ERISA Insights: Challenges & Compliance in Modern Healthcare, with Nick Welle

Transcript

Lightly edited for clarity.

Please note that Nick’s comments on this podcast are his own personal comments and do not represent any views or positions of the clients of Foley & Lardner.

[00:27] Justin Venneri: Hello and thank you for joining us for this episode of the Astonishing Healthcare podcast. This is Justin Venneri, your host and Director of Communications at Capital Rx, and I'm excited to have Nick Welle in the studio with me today. Nick is a partner at Foley & Lardner and the chair of their health benefits practice. Nick and I had a really great conversation about ERISA related topics recently and I thought, man, I wish I was recording this; he'd be a great guest on the show. So here we are. Nick, thanks for joining me today.

[00:53] Nick Welle: Thanks, Justin. I appreciate you having me on and thanks everyone that's tuning in to listen.

[00:57] Justin Venneri: So this is one of those topics that I want to try and be helpful on and entertaining if possible, but in a compliant and considerate way. ERISA in general has become a more interesting and important topic to understand, particularly due to the Consolidated Appropriations Act of 2021 and its associated requirements, but also because of some of the legal activity we saw in 2024.  

We'll get into some helpful things plan sponsors can do to meet the requirements. If you're doing them already, great, for our benefits brokers and consultant partners out there that are listening. If your clients are aware of these things and doing them, kudos to you. But we'll put some links that Nick provided in the show notes so that you have some resources available.  

Before we get into it though, Nick, how long have you been with Foley & Lardner? How'd you get into health benefits and health benefits law?

[01:44] Nick Welle: Yeah, Justin, thanks again for having me on. I appreciate it.  

My journey sort of started in this space where, you know, I started off as a baby lawyer practicing and the Affordable Care Act came out. And I've always been interested in health insurance, healthcare overall, and I said, man, I just want to dork out in this Affordable Care Act thing.  

So I read the whole thing, there's over a thousand pages, started speaking at it, got into it early on in my career. I got to work at a different law firm where my mentor said, all you want to do is ACA and health plan work, let's do it.  

So I started my specialty pretty early on in my career where all I did was ERISA health plan work. So fast forward, I have been working now at Foley for, geez, probably over 10 years. And my specialty is 100% just employer-provided health benefits. As nerdy and as niche as that sounds, there's enough work there to keep me and a whole team busy.

[02:40] Justin Venneri: And I definitely appreciate the nerding out aspect of it. I remember sitting at my desk on quote, unquote, Wall Street, and having to go through the ACA and figure out which publicly traded companies it was going to have the greatest impact on. That was a lot of fun.

[02:53] Nick Welle: And it was, it was a huge piece of legislation. So, I mean, it definitely had an impact on the stock market and big players in the US financial space. So it was a huge piece of legislation and we're still having to deal with it, whether people are excited about that or not today and probably likely for many years to come.

[03:10] Justin Venneri: You know, it's funny that you say that, because just recently the ACA has come up a couple of times on one podcast episode [AH048] with Dr. Eric Bricker. He brought up how, you know, the removal of the lifetime maximums had an impact on drug prices - they can be increased exponentially. The other was a KFF survey. One of their polls came out today again and just shows overwhelmingly people are, you know, in favor of the ACA, it looks like, based on that data. So it's amazing how it's still front and center, even though it's an older piece of legislation, an older law.

[03:40] Nick Welle: Right. I mean, we're at, I believe since its passage in 2010, we're at like 15 years.

[03:45] Justin Venneri: Yeah.

[03:46] Nick Welle: We're still kind of smoothing over some of those rules that have been implemented, right? And we're still figuring out the ACA marketplace and we have to deal with the premium subsidies extensions this year. And what's the new Trump administration going to do with the marketplace? Are they going to try to strengthen it? They themselves might have a beneficial interest in it because they proposed this idea of an ICHRA that's tied to the marketplace. So the ACA is still being examined and we're still trying to put all the pieces together on how it's going to work with our current health benefits space that we're in right now.

[04:20] Justin Venneri: Got it. So let's take a step back. ERISA - high level health plans. Where do you start the discussion about it? What is it that listeners, you know, the average new benefits director or benefits consultant, what must they be aware of or understand as it relates to responsibilities under ERISA or ERISA itself?

[04:38] Nick Welle: Yeah, I think if you're coming in and your responsibility at a company that's somewhat large is benefits, that's no easy task at all. Especially nowadays. And you can't know it all. It's impossible to know it all, whether we're talking about the laws, the industry lexicon, who to choose for your vendor, obviously you need to rely on your advisors and your consultants and there's just a lot there.  

And I remember I was talking to a colleague just a few weeks ago and like 10 years ago, 12 years ago, we'd be like, what's a good article topic to talk about benefits? And like maybe we'll do a refresher on COBRA or something. Right? And nowadays there's legal updates happening every single day with the CAA, price transparency, fiduciary lawsuits, district courts halting laws and imposing injunctions, no surprises act disputes. It's just crazy how much is going on.  

And you know, in the show notes, I know you're going to put a link to our employer checklist for just CAA and price transparency alone. And that is several obligations just through CAA price transparency rules that employers need to know and need to do in order to stay in compliance for their self-funded plans.  

And when I put together like a checklist for some of our mid to larger self-funded employer clients for the benefits team, it's typically five pages; it could be up to 35, 40 different things you need to do.

Reference Materials for Employer Plan Sponsors

• Employer Checklist for New Health Plan Price Transparency Rules and CAA
• Final Mental Health Parity Rules – Top Five Changes to the Status Quo

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And so it's impossible for like a new person getting into benefits to know it all, but they should have a good process in place where they say here's my checklist, here's my calendar, I gotta talk to my benefits consultant on a routine basis and I need to talk to an ERISA lawyer. And that's not to be a self-plug for ERISA lawyers or anything like that, but we do have our value, especially when it comes to folks trying to learn, right?

[06:19] Justin Venneri: It's definitely reasonable. There's a lot of complexity there that I can only appreciate from an observer, an outside seat. And it does seem like all the updates and all the things you've got to be aware of, especially when news crosses. Like my next question is, you know, what are the key takeaways and observations about the recent fiduciary litigation that you just alluded to? Are there any traps, are there any things specific to ERISA that you know, you think the listener should be aware of?

[06:46] Nick Welle: Yeah. Obviously I think folks and commentators have talked about this already. We are sort of in a new era right now where we had all this 401k ERISA litigation and now it seems to be bleeding over to the health plan space. And now we have ERISA health plan fiduciary cases. And when the first case came out, we're all like, wow, this is absolutely a brand-new type of lawsuit.  

I think it's also important to look to see that there's other types of fiduciary lawsuits happening as well where stones are being hurled in different directions. We of course have the original J&J lawsuit. We have a copycat, another copycat with a variation. So multiple employers that are plan sponsors getting sued by their employees or the plan participants. But we also have employers suing their service providers for breach in fiduciary obligations as alleged. And we also have plan members suing service providers, TPAs and PBMs directly for breach of fiduciary duties.  

So it's not just oh, big employer got sued by one of its plan members. There's fiduciary accusations that are being hurled in many different directions right now. And it's kind of the first time we've seen it. Now we'll have to wait and see if there really is a huge tidal wave that's going to happen here because will these claims ultimately be determined to be meritorious? I think there's a lot of defenses for these. And so perhaps these all wane away naturally because the defendants win. We don't know yet. But that does get us to the topic of how do I avoid some traps? How do I avoid being named in a lawsuit if I'm an employer that sponsors a self-funded plan?

[08:20] Justin Venneri: Right.

[08:21] Nick Welle: One of the big things is in the 401k world we have these committees and they meet quarterly or even more frequent than that. And they have outside independent fiduciaries come in and they look at the financials and they have minutes. I don't see a lot of that on the health plan side. And as a guy that just does health benefits work, I always say to myself, why are we a little more sloppy on the health plan side? Why don't we have more formal benefits committees? Why don't we invite consultants, pharmacy specialists, consultants and, not a plug, ERISA lawyers to join the committees and talk about who have we selected. Let's monitor our service providers.  

What compliance obligations are coming up? It's October, we got to get our 45500 done. Oh, it's July. PCORI fees are due. End of year, gate clause attestation.  

In the perfect world - and everyone's super busy, don't get me wrong, and folks in HR and benefits are the busiest people in the world. But in a perfect world, we're setting up a much stronger process where we have committees and decision-makers sitting down and talking about what's our health plan looking like today and who are our vendors? Right? And do we need to switch at all?  

So in a perfect world, I do think it's one, having that process, a committee and procedures in place and then two, of course, is just getting the information that you should have. CAA, of course, passed the compensation disclosure requirements for consultants and brokers. That should be something that plan sponsors should get data from the PBM. And you know, going through an RFP routinely and perhaps during that RFP, choosing some new players. Maybe it's non-traditional PBMs, non-traditional TPAs, pass-through entities, vendors that have ideas that are different than some of the more core service providers. Right? And so make sure you're doing your homework, basically. Doing your homework.

[10:06] Justin Venneri: Yeah, no, we're going to get into a little bit more about reasonableness a little bit later in discussion. And not to plug Capital Rx, but I mean we are one of those alternative pharmacy benefit managers. And it's fascinating to us to continually hear -- or at least I hear from my colleagues on the front lines, whether it's account management and RxDC requirements and questions around that. To your point about having a process, it's your data. You need to know how to submit it, right? And when it needs to be submitted.  

What sources of truth or what role should the consultants or benefits brokers play? How do you see that changing over time because of this increased focus on, you know, the CAA and the requirements and the fiduciary responsibility?

Related Content

• AH041 - ERISA Litigation Outlook and Meeting CAA Requirements: What Can Plan Fiduciaries Do?
• Replay - Build a Lasting Pharmacy Benefit Strategy with Never Move Again™
• The Consolidated Appropriations Act (CAA): Kudos to the Department of Labor (AJ Loiacono at ViVE)

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[10:47] Nick Welle: Yeah, I guess a couple of observations there. One is, I think we're seeing a rise of pharmacy consultants. Whether that's embedded in your core benefits consultant or as an independent pharmacy consultant. I think we are seeing a rise of folks using pharmacy consultants and I do think they have their value. And I see why a self-funded employer, especially a large one, would choose one. Because again, the rules are getting very complex. But not just the rules, but the design is getting very complex.  

I mean, I just think about some of our plan sponsors that use so many different creative ways to try to contain costs while still ensuring quality. Whether you're carving out high-cost specialty drugs, trying to utilize coupons and have it be ingested by the health plan, foreign drug importation, point of sale rebates, copay maximizer programs, you know, mandatory mail, there's so many different options as well.  

And so having a consultant that really knows Rx or just does Rx can be incredibly valuable. And I'm seeing, both on the core benefits side, a huge focus on that or the creation of pharmacy consultants that just do that. And I think they can keep themselves very busy because we have that right.  

So I do think there's a huge, huge focus on Rx right now when it comes to the consultants, and rightfully so. One, because it's so complex when it comes to the rules and possible designs. But two, we also are now in an era where the drug costs are getting higher and higher relative to the overall health plan. And so, you know, it used to be medical was the big focus and you had these drugs and people are getting their drugs at Walgreens. And now it's especially with the rise of some of the very high-cost specialty drugs for -- either their orphan drugs or drugs for very severe conditions, higher costs overall at the health plan, now there's a bigger focus on that because it's become a real critical cost decision for the plan sponsor. Right?

[12:49] Justin Venneri: Yeah, we definitely see that. I mean, going from a single-digit percentage of the total Plan spend to 27, 28, 30, a third in some cases, depending on the population.

[13:00] Nick Welle: Absolutely, yeah. And then the other thing I'd say on the consultant front is I think we're just scratching the surface on the CAA compensation disclosures and industries take a while to get adjusted. And I do think we're going to see -- we already have this era of transparency happening in the group health plan space, especially for self-funded plans. I think we're going to see that in the consultant space too, where the compensation disclosures might provide more detail and there might be more insight on commissions received and other types of incentives.

[13:32] Justin Venneri: Got it. And this word “reasonable” -- you described maybe setting up quarterly meetings, a committee, to discuss things. I'm assuming data collection and analysis and being able to show that you've taken steps as part of this. Walk us through your thoughts. You know, off the cuff, on the word reasonable in this context and should it be viewed negatively or can it be viewed constructively? How do you think about it?

[13:55] Nick Welle: Yeah, you know what? I think the ERISA framework for these types of fiduciary lawsuits is set up so the employer can't be penalized because the ultimate outcome wasn't what they thought it might be. It is supposed to be, do you have a prudent process in place on the front end? Did you look at the information, the fee information, how your plans are designed, what your vendors are getting paid? And did you make a decision to say this is reasonable in terms of what our service providers are receiving in compensation, and our process was prudent. We went through the RFP, a benefits consultant helped us with the RFP, and we knew the exact commissions and comp that benefits consultant might receive if we chose various vendors. We opened up the RFP to four different players. One of them was more non-traditional, maybe two of them. And we looked at different plan options and we met with the CFO and our ERISA lawyer and our benefits consultant and we had some folks crunch numbers and we thought it was a prudent process.  

I think that's really the defense, if that was true, for any employer that is possibly faced with a fiduciary lawsuit, is that we just did our homework and we made a reasonable decision. It doesn't have to be perfect. And I do think it's important to emphasize it doesn't have to be the lowest cost.  

A lot of larger self-funded employers, they want to give their employees benefits to keep them. You know, you want to attract and retain that talent. And so they might actually say this vendor and this Rx product or this formula that we have, it is not the cheapest, we know that. But we want high-quality plans and benefits for our members.  

And so it's not just a race to the bottom in terms of who was the cheapest and why did you go with the cheapest. But it is, overall, what did we want to achieve? And do we think the fees received by our vendors were reasonable based on what they gave us in return?

[15:46] Justin Venneri: That's really interesting to think about it that way because it's more like an equation, right? What do you want the outcome to be? What are the variables that are going to get you to that? And on average, are you achieving the goals you set out for your plan, even though a drug may have been more expensive than it was available somewhere else?

[16:03] Nick Welle: And that's absolutely right. I mean, I know there can be narratives where you say this one drug is $50, but on the formulary it's $5,000, right? And you hear those narratives and certainly those could be true; that could be a problem.  

But you have to look at it in the totality and say, yeah, that one drug that you found, yeah, that probably could be cheaper. But we designed the formulary in its totality to give us the best bulk savings we can find. You know what I mean? So there is this whole totality analysis as well.

[16:33] Justin Venneri: So the resources, the checklist -- and you know, again, we'll provide those links -- if we haven't talked about it already, can you tell me about any of the key points? Maybe just summarize one or two that you would consider homework for a plan sponsor listener or a consultant listener of this episode?

[16:47] Nick Welle: Yeah. So on the show notes, there'll be a guide for the self-funded employer on all things new laws. It doesn't get into the old laws that have been around for a long time, like your 5500s and your PCORIs and your SBCs and SPDs and your alphabet soups and all that. But it summarizes all the requirements that have happened basically since 2020 when we have the TIC, the Transparency and Coverage rules, as well as CAA and all those requirements, including things like the mental health parity, NQTL analysis, machine-readable files, gate clause attestations. There's a lot there.  

So my tip would be to go through that and make sure, Whoa, do we know what this is? Two, are we set up to achieve this? Three, have a calendar of all the things you need to do and work with either your ERISA lawyer or your benefits consultant or both to be like, all right, let's get a process in place to make sure we are actually checking the box on all of these things. Because there's a lot there nowadays.

[17:44] Justin Venneri: Yeah, it definitely seems like having a calendar that's dynamic would be super helpful here.

[17:49] Nick Welle: For sure, yeah.

[17:49] Justin Venneri: Okay, so here we are. Nick, thanks for sharing your thoughts on ERISA with us and preparing a reasonable process. What's the most astonishing thing you've seen or heard over the last couple of few years that relates to our discussion topics here that you can share -- of course the disclaimer, has to be compliant, has to be safe to share. But we'd love to hear a good story from you or something that surprises you still to this day, even though you've been doing this for over a decade.

[18:13] Nick Welle: Yeah, honestly for me, the last couple of years, just how quickly everything is changing. Not just the laws, but the plan designs and the stakeholders all changing how the delivery of health benefits works. So I just think nowadays, especially after the passage of CAA and TIC and all the new plan designs -- especially you see on the Rx side that I already talked about, like the copay maximizers and specialty drug carve outs and getting specialty PBMs in addition to your core Rx PBMs -- it got really complex and really confusing for many very fast.  

And so I think that trajectory, from the last one or three years compared to, you know, three year period of time before it's really fast. We're talking turbo fast. And it's crazy just how complex it's gotten, both in structure as well as in law.  

And so I've certainly had conversations with employers who, I don't fault them at all, who have said, I have not been doing X, Y, or Z compliance obligation yet. I didn't know about it. Or yeah, I heard about it, but you know, we just didn't put it into our system yet and we didn't assign someone to it yet. And again, no fault to anyone that hasn't yet because there's a lot going on -- the mental health parity NQTL analysis is a great example of that, where people are saying, what do I need to do? The DOL says everyone's getting an F. I would like, I'd like to at least get a C.  

And so it's just a lot for everyone to manage, and each year it feels like these self-funded employers are kind of running their own insurance company because they need to figure out how to keep costs low, but they also need to run their own compliance and they also need to make sure they have a great member experience.  

So more and more I feel like I'm telling employers like, lean on your advisors, you got consultants. But it's like, yeah, ultimately you’re a self-funded plan sponsor, the obligation’s on you. And I know you might be a department of one, but you're in charge of keeping costs low; you're in charge of member satisfaction, and you're in charge of compliance. You know what I mean?  

And so it's just a different era, I think now where we're at with self-funded and health benefits.

[20:13] Justin Venneri: Yeah, it's intense. And you know, I think I may have found one person to talk to that has more acronyms than we have at our shop. That's great.

[20:22] Nick Welle: It's an occupational hazard for sure.

[20:25] Justin Venneri: For sure. All right, Nick, well, thanks so much for joining me today. Look forward to hopefully having you back on and staying in touch. Have a great rest of your day.

[20:32] Nick Welle: Absolutely. Thank you so much for having me on.

To connect with Nick, CLICK HERE.

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