Self-funded plans ignore the Consolidated Appropriations Act at their peril

In Self-funded plans ignore the Consolidated Appropriations Act at their peril (10/31), Capital Rx Chief Growth Officer Kristin Begley, PharmD, lays out the steps that should be top of mind for plan sponsors as they consider new fiduciary responsibilities outlined in the legislation ahead of the December 27 reporting deadline.

It would be understandable if some leaders of self-funded benefits plans have not devoted ample time and attention to the Consolidated Appropriations Act (CAA), introduced into law in late 2021. Plan sponsors, including big and small companies, labor unions, and other organizations that provide health benefits, have had their hands full fending off challenges on multiple fronts posed by the pandemic, talent shortages, inflation, and persistent foreboding economic news.

So it wouldn’t be shocking to learn that new legislation related to health coverage — typically the domain of HR and benefits managers — might not have risen to the top of their priority list.

But it should.

The CAA places a range of new fiduciary responsibilities on individuals who manage health plans and on select employer-sponsored health care providers. These regulations aren’t just for plan fiduciaries, but also for trustees and other payers that provide health benefits, including pharmacy benefits. CAA provides plan sponsors with a framework to better evaluate and manage health plan spend and gain greater visibility into compensation arrangements between brokers and providers. That’s the good news.

However, it also creates an element of risk, because organizations must comply. Plan sponsors must familiarize themselves with the costs of health care, with how their broker or consultant partners are paid, and they must be able to disclose this information to the Department of Labor and Health and Human Services. Those who eschew this responsibility and fail to develop a defensible process or run afoul of CAA regulations could face fines and significant liability in the form of legal action from employees.

Related: Consolidated Appropriations Act brings long overdue transparency: panelists

The arrival of the CAA is not all that dissimilar from legislation designed to address the excessive fee scandals with 401(k) and retirement plans in the early 2000s. It took some time, as corporate leadership did not grasp the implications of those laws until they faced a litany of lawsuits and fines. Today’s leaders can avoid a similar fate by taking actions that will achieve compliance and ultimately lead to better health care coverage for employees, thereby easing the “tapeworm” of health care costs continuing to eat into annual pay raises.

The following steps should be top of mind for plan sponsors as they consider the new responsibilities outlined in the CAA:

Embrace your newfound power to understand the actual costs of health care

A desire to maintain the status quo and avoid the disruption associated with changing health care services providers/vendors has always been a driving factor in not exploring options in the marketplace. But that thinking needs to change immediately. In this context, plan sponsors should see “disruption” as a positive and an opportunity to deliver better and more affordable health care, elevate employee happiness, and engender greater loyalty. Rising health care premiums have robbed employees of pay raises for far too long and are a tax we all pay to subsidize a system mired in opacity.

End favored broker status

The days of giving health care vendors blank checks and turning a blind eye to compensation and commission arrangements are over. Employers can no longer stick their heads in the sand when it comes to their long-standing, trusted brokers or continue to show unvalidated trust or unchallenged loyalty. Everything a health plan provider has to offer must now be evaluated for its value and reasonableness, including fees paid to consultants for evaluating and placing business.

Establish internal processes

Changing the decades-long approach to managing health care providers and intermediaries requires not only cultural changes, but also changes in long-held administrative practices. Identify and establish the new processes needed to formally document every decision related to identifying, vetting, and ultimately selecting health plan providers. Replicating the structure already in place for managing employee retirement plans is a good place to start.  

There is no “easy button”

With change comes uncomfortable conversations, hurt feelings, and upsetting moments within the health care supply chain. Expect some employees to resist, as well. In committing to the transformative change ushered in by the CAA, employers must adopt a change management posture and expect that little will come easily or comfortably. If it’s too easy, it’s probably not being done correctly.

CFOs and HR should partner closely

Elevate the prominence of human resources professionals responsible for compliance with new health care regulations and ensure they fully understand their responsibilities. More than ever before, HR leaders must be integrated into the broader organizational business practices. They need to have a seat at the table, access to other leaders, and the ability to freely voice concerns and raise flags, while CFOs should partner more closely with HR to help understand the total costs of health care.

All projections point to continued increases in health care costs, driven by a post-Covid surge in medical care demand and global inflation. The CAA challenges companies and leaders to improve the way health care benefits are procured, helping employees realize greater value for their hard-earned dollars. Changes in processes, approaches, and thinking may not happen overnight. But if the legal and ethical imperative to do the right thing isn’t enough motivation, the potential for a wave of litigation should be.

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