A Fiduciary Framework for Managing Employer Healthcare Programs. Webinar.

Transcribed from the recording and lightly corrected. It may contain errors; the recording is the record.

00:00Hello everyone and welcome to HR Florida sponsoring. It's actually SHRM Florida, but part of the HR Florida committee. We are excited to bring to you today one of our pre-conference presenters. Chelsea is going to do most of the presenting today. And we met Chelsea and Donovan about three years ago at HR Florida. They have been speaking there for, I think it's the last three years, bringing really fascinating information around benefits to our audience. And we are so excited to partner with them today. They will be presenting a half-day workshop at HR Florida. Save the date, as this says, from August 30th to September 2nd. If any of you would like to attend, you don't have to live in Florida, but you can sign up for their pre-conference workshop so that you get the really in-depth information that they're going to be sharing that day.

01:06With that, I'm going to throw it over to Chelsea and Donovan. I think Chelsea's going to primarily be speaking today. And they're going to share their topic and we'll be back at the end to let you know how you can get more of this information. Thank you Lori. Hi everybody and welcome to our webinar today. So as Lori said this is our teaser, our sneak peek of the three-hour workshop on August 30th. Actually I believe it's the 29th, excuse me. So today we're talking all about employers, plan sponsors, creating a fiduciary governance program to better manage their health and welfare program. So essentially for some of you on the call this might be a little bit of a wake-up call for others maybe this is something you already have in place for the clients of ours that i can see on the call this is definitely

01:55something that you have in place but the plan today is to really give you a roadmap and some ideas on how to create a governance structure around your health and welfare plan so that you can reduce financial exposure reduce legal liability and increase participant health outcomes because that's the beauty about doing the right thing is it costs less and people get healthier it's kind of a dream so we're going to talk about how ERISA and the CAA of 2021 really started to ramp up these discussions around health plan lawsuits Donovan's going to take us through that we're going to look at a couple lawsuits today a little bit high level at the pre-conference workshop we will dive way way way deeper but Donovan's going to take us through that as well And then I will pop in right around halfway to show you what do you actually do?

02:46What does this governance process look like in real life? So without further ado, I'm going to hand it over to Donovan to give the ethos founding story and tell you a little bit about himself. All right. I guess I'll, am I going to introduce you as well? I think, I think you deserve it. Go for it. Oh, I am doing it. Yeah. I'd love to hear you say actually. so chelsea rikus is uh the president of ethos benefits she is not my sister she is my wife uh if you notice we have the same we do get that a lot does that happen i'm not okay we ask all the time we had one client that didn't know after like five years i got a laugh out of that but um we actually started working together first and kind of found the rest later but

03:30we are, you know, kind of the head of Ethos Benefits. The main difference, like what we're trying to do is, you know, our background is actually more from the security side. So I was a fiduciary financial advisor, you know, working with plan sponsors on 401ks and pension plans. And there is a standard of care. There is data. There are disclosures. There is transparency. And just got a peek into the health and welfare side and was blown away by all the problems, the conflicts, the lack of data, transparency, the compensation models, the services being provided back to employers for the compensation, just none of it made any sense. And it set us off down a different path. We realized we were working with the right type of clients, right? We wanted to make a big impact in working with plan sponsors that had a lot of participants was the way to do

04:22that. Unfortunately, the health and welfare side needed a lot more help and attention than the 401k side which led us down this path and we've been all in on health plans ever since so uh we're going to talk a little bit about stuff that you guys have probably heard that we've heard and hopefully preview some of that today but again this is also you know only 30 or so minutes this is meant to be a preview for our larger course we did it earlier this year for the International Foundation of Employee Benefit Plans. We'll be doing the same course at HR Florida as a pre-conference. So things that we've heard that we kind of dispelled are always kind of working with our clients on a single digit increase is a good year. You're too small,

05:11we can't give you claims data. The carriers will handle your gag clause or your RxDC or your mental health parity, all the things that plan sponsors are actually responsible for. If you've heard any of those, go ahead and chime in in the chat and like raise your hand. Raise your hand if you've heard these as we go along. Another thing we've heard from plan sponsors is our broker is big and has market leverage. And on the face of it, it is almost logical, but there's actually nothing behind it. There is no truth to those types of position claims. My personal favorite is the claims are the claims, and this is used to justify another renewal increase and zero solutions or strategy being brought to you. This is the one that honestly confused me the most because I found

06:01it ridiculous, and I didn't understand where this was generating from. A claim is a dollar amount. It's a request for dollars. A condition is the thing we cannot change. So we can't change the employee's condition that they sought care for, we can greatly influence the claim, which is a request for dollars. The data is proprietary and can be released. We still fight this every day. I had it happen yesterday on a very large group banding, and our local hospitals won't accept other plans. Certainly not the case either. So one thing I'll add is just the more confused and helpless that you feel as a plan sponsor. I hear this all the time from HR, CFO, and CEOs that we speak with. It's like, well, it's just, you know, this whole thing's a mess. I wish we didn't

06:49have to do this at all. And all these things that Donovan just went through, they're said and they're done as a way to confuse you and push you into a corner and make you feel like this really is something you can't control. So what we're going to be talking about is fiduciary status. So everybody on the call today, if you found this interesting enough to take an hour out of your day, congratulations. You're probably a fiduciary in your company for these decisions. It is not a official designation or something you signed on to be. If you're part of the health and welfare decisions, you are a fiduciary in your company. Congratulations. So that's if you're making decisions about vendors or carriers, you're exercising any kind of discretion over the plan or how dollars are spent.

07:40And this is also covered under ERISA, just like the retirement sector. Some things have changed recently, which we'll be discussing, but it's not just the company that's held liable. It's these individuals personally. We've seen that on the lawsuits that have come out. It is the company and then also all the people in those positions, HR, CFO. They're also personally named alongside the company in these lawsuits.

08:10So what kind of duties? What kind of things need to be done? A couple ones up here on the screen. So 404A. So I think everybody would argue and think they're meeting this, which is the act of loyalty, but it's also the act of prudence. So did you make a prudent decision? Did you have enough of a process? Do you have a big enough understanding of the decisions that are being made to make good decisions for the employees? I think everybody would say, of course, I'm being loyal to the plan participants. I'm only making decisions for them. But the real kind of trigger on that one is, was it a prudent decision? Did you have enough information to make a prudent decision? And that's really what we're seeing come out. So prohibited transactions, no self-dealing conflicts of interest. Certainly we see, you know, we have seen in the past a lot of conflicts of interest where the brokers, the cousin, the brother, the niece, the nephew, the childhood friend, that kind of stuff.

09:15And that keeps companies stuck and unable to kind of move forward and make any decisions. That can certainly be troublesome. And then one of the biggest kind of factors also to being a prudent decision maker is understanding the compensation models that you have agreed into.

09:34What is your broker getting paid? How much is your TPA getting paid? How much is your PBM getting paid? Anybody that's a covered service provider within the plan, before you make a decision on them, you should have a disclosure understanding how they get paid, when they get paid, when might they make more. to understand if their models align with your end goals and if that compensation is reasonable, if it makes sense for the services that they're providing. Do you have a scope of services that they're providing in relation to that compensation as well? So 408B2s have been done on the retirement side for a decade plus. Now that same kind of requirement is on the health and welfare plans as well as some of the recent leverage and legislation. One thing to add would be a lot of plan sponsors inherently trust the vendors that they're

10:29working with, right? And the conversations I have, it's, oh, well, they're such a nice person or they're such a good guy. We've known them forever. They've been with us for a decade plus, whatever the reasoning is for that trust. But really, when we looked at that initial slide that Donovan shared with the claims of the claims. Oh, we don't accept your plan. A single digit is a good year. That's proprietary. Sorry, we can't show you that. Those sayings and then how people in this industry, entities in this industry are compensated, the vendors that are working for you, a lot of the times are completely misaligned with what you actually want as a plan sponsor. So I just want to share some foundational knowledge so everybody's on the same page about why does it matter to know what they're making? Well, because traditionally vendors in this

11:19industry and the healthcare supply chain for employer health plans make more money when plan sponsors spend more money. And it seems counterintuitive and it is counterintuitive. It's completely misaligned. So part of the workshop is showing plan sponsors, how do you design contracts? How do you design compensation with the people that are supposed to be serving you in a way that actually serves you, where they're not winning when you're losing.

11:50So let's talk about a little bit about the numbers. So this year, the 2026 Milliman Index came out, and that's a benchmark for employer-sponsored healthcare plans all over the country. I was pretty disgusted with last year's number, and this year we've seen a 7.2% increase from last year. The average cost for a family of four on an employer-sponsored healthcare plan is $37,824, which is a number that's just, it's hard to comprehend that that's just health insurance for a family of four. That's unaffordable for an employee. It's unaffordable for an employer. That's unaffordable for the two of them to split and still be competitive and have disposable income for that family. We've seen 188% increase in plan costs since 2005. We ended up a little under 10% heading into 2006. And of course, as we all know, it's usually the number two

12:51cost driver on the P&L for expenses. So it's not something that can be ignored. So I think the interesting thing is like the health and welfare fiduciary status has always existed, at least since 1974, you know, with ERISA. The problem with it is, one, in 1974, we didn't have the healthcare inflation that we have now, and it wasn't the problem that it is today, and health plans look very different than they do today. So what the CAA of 2021 did is it finally applied some metrics and some responsibilities of what it means to be a prudent fiduciary and some things that the company needs to do to meet these same obligations that had already been defined on the retirement side. So the first one we talked about, which is that 408 B2 disclosure, any covered service provider making more than a thousand dollars.

13:50That could be your telemedicine, could be, you know, your PBM, your broker, anybody. And we would also say do that for the non-arist lines. You know, that could be like accident, critical, cancer coverage. Anything that you're offering in your health and welfare package should really come with a 408 B2 disclosure, and we'll show you some recent litigation and what kind of that brought up without companies doing it.

14:16Number two is the gag clause removal. So this is something you're supposed to be attesting to every year since 2022, because the CAA was passed in December 21. And this is basically saying to your insurance providers that they cannot withhold your data because you need to understand your claims data and your cost to make prudent decisions.

14:41And if this is fair, if it's competitive, if it's well priced, if it's reasonable for all your plan participants moving forward. Number three is the RxDC reporting. this is basically an annual prescription drug cost and benchmarking report for your top 50 drugs. If you were to do this for your top 50 drugs, you would basically cover 95% or so of your total RX spend within your company. What we've seen with this is, you know, this is an employer responsibility. They have to have it, see it, understand it, right? The job is for employers as the one being responsible for this to have the benchmarks to make better decisions. But what we've seen in practice is your PBM saying that RxDC reporting, don't worry about it. I did it for you. You don't have to do it. And you say, great, thank you. Can you send me a copy? No, I couldn't possibly.

15:41We have to do these for everybody. I can't get you a copy of this. So this is not something you can pass off to a PBM or any third party. This is an internal benchmark. It's meant for the plan sponsor, the company, to make better decisions and understand their drug costs. Because now drug costs are, you know, on average, 20% or more of the total healthcare spend, as high as 50% to 70% I've seen even. It's really gotten out of hand. The last piece is mental health parity. This basically just means matching your mental health benefits to your medical benefits. This is usually pretty well done. To do a really good study, you have to do an NQTL analysis. It is a little bit more in depth, but I'd say one through three are kind of the big drivers, but mental health parity is very important. You want to make sure you're being compliant with that as well.

16:39I think these are the most important changes to health and welfare plans since ERISA, and it's because these are not compliance functions for the sake of compliance to give you something else annoying to do, like ACA reporting, right? Like, that's kind of just a burden. It's just this other compliance and reporting package that we have to do that takes a lot of time. One through three, if you actually do these things, you'll be equipped with much better information to make a decision and make an impact for your health care spend next year and the following year. Start to understand your trends and be able to start projecting and, you know, make better decisions for your health care plan in total. so the wave's already here so one of the interesting things is like when i was trying

17:27to get chelsea to to join me in the in the business and um you know come over to this side my pitch to her was look i've been on the retirement side i've been doing this for 401ks i've been helping companies mitigate lawsuits and the fraud waste and abuse is not even 10 percent of what I see on every single health and welfare plan. I told her that and I told her that and it took, I don't know, like eight years from like when I started telling her it was going to happen to actually seeing the first one, which was in 2021. And that was a direct, that was directly correlated basically to the CAA because it's like, all right, the CAA finally put out the guidance. These are the activities you need to do. Now we have something to kind of benchmark that against.

18:14And we started seeing a wave of litigation employees versus their own company, similar to 401k lawsuits for the decisions they're making. Right. Because this is coming out of their paycheck. It's one of employees largest costs as well as the second biggest cost for the employee as well. I remember when we, well, so Donovan had the agency and then I came on as a partner about 10 years ago. And this literally was a conversation that we had where he was like, hey, I think that we designed an advising model to be completely unconflicted, the exact opposite of basically every other kind of brokerage agency in the nation. and let's basically advise through the fiduciary lens with everything that I've learned with my securities license on the retirement side. I'm like, yeah, I mean, that sounds amazing, right?

19:03Like that sounds great. And so that's what we did. And we were doing it and doing it and using the language fiduciary, using data, like not trying not to design any plans where we had restricted claims data or clauses that weren't in the best interest of plan sponsors. And for so long, I felt like we were crazy because multiple times we had carriers, vendors, TPAs, PBMs be like, nobody's ever asked us for that. Like what type of business are you guys running? Right? Like we were the crazy ones. And then in 2024, the Lewandowski versus Johnson and Johnson lawsuit popped up. And that was really the first big one where it was like, oh, okay, he was right. Right. Because I'm starting to be like, man, we've really like staked our claim here on this fiduciary hill.

19:49And like nobody seems to care about this message. So it's been such an interesting industry to be a part of, to kind of watch this evolution. I say all of that to say that it's been slow, but when you look at it compared to retirement, look how much faster things are happening. I firmly believe that the idea of working with unconflicted vendors, so plan sponsors like all of you on the call today, working with advisors, PBMs, TPAs, carriers, whoever, vendors that are unconflicted in the way that they're compensated and the way that they advise you. It's not just a nice to have like, cool, we'll check the ERISA checkbox. It will be the industry standard.

20:32Much sooner, I think, than what we saw on the retirement side. Donovan, would you agree? Yeah, certainly. I mean, we can see that, you know, with the speed of how this is picking up and the first win is just going to set off a tsunami of these cases, because I think what plan sponsors maybe don't understand is one, by the brokerage you hired, once we see, you know, what they have done on one case, it's a pretty easy bet that they've done that on all their other cases. and all this data is available on 5,500. So I can find any company's 5,500 in about three clicks, and it's going to tell me who's representing the case, what products are in there. And then I can even kind of find these bad behaviors within five minutes. So it's not

21:18going to be hard for the attorneys to do the same thing. So when they see a brokerage do a bad act, they're going to know, okay, that wasn't the first time you did that. And then the lawsuit goes from employees to employees basically against employer. And then they're also including that brokerage as well as part of the lawsuit, which I have on an upcoming slide. Donovan, what would you say to the plan sponsors who think, yeah, but United Airlines is a big company. Johnson & Johnson is a big company and I'm mid-market. Yeah. Yeah, that's certainly true. They're going to start with the biggest companies, make the biggest splash. I mean, these are attorneys. They're going to get a percentage of those fees. That's how it's going to start. But employees are going to be seeing this. And

22:02it's not just a, this isn't like a scare tactic or like you could be sued. You certainly could, but by making these decisions, you're actually going to positively impact your healthcare spent, which helps every single employee and your company. And that's the actual point is that these solutions are out there. So these things like the claims are the claims of one digit increases is an amazing year. Those things, there's no truth to that. Once you get to the data and you start to understand how these things are structured by understanding compensation and how and when people get paid and you have the data to back up and have a good negotiation and go out to market and understand your claims cost rather than just having all that be behind the curtain and allowing a broker to do it who gets paid more when they sell a bigger risk transfer, right? It's in the name.

22:53A broker sells a risk transfer. The bigger the transfer, the bigger the commission, right? So just adding some sunlight to those things is a positive thing. And you're never, it's never going to be at anybody's advantage, a companies and individuals to make a decision with less information than they should have to make that decision, right? You can still trust that person. You can negotiate with them directly. You don't have to fire them, right? But you do have to be equipped with enough decision to make that distinction because everybody else has more information than you, and they're all making more when that number's bigger. The broker, the carrier, the providers, the hospitals, PBMs, drug manufacturers, everybody downstream makes more money when you guys spend more. So these are a couple of the lawsuits. So the Lewandowski

23:43versus Johnson & Johnson, this originally got dismissed, and it was just procedural, right, Because they're applying 401k logic to health and welfare plans. And the original judge just didn't quite understand that because he wasn't looking at, he was trying to look at it like a 401k where everybody has a personal balance within their account and they could individually quantify damages. But a health and welfare plan doesn't work that way, right? Works a little bit different. If a company is making a decision, let's say with a bad PBM, which is what this case was about, to systematically overpay for all of their drugs by 25%, what does that in turn do to the premium next year, right? The claims are the claims, right? So the higher those claim dollars are, the higher the premium is going to be.

24:34That's been the justification everybody's heard. So by making that decision, they're continually damaging everybody. and you know when I was a 401k advisor I used to do open enrollments and talk to people about you know the miracle of compounding interest and how that benefits employees and how it adds to their 401k and their retirement fund and this is kind of that flipped on its head right the nightmare of health care inflation and how those bad decisions compound year after year 10 this year next year your 10 compounds on the prior 10 and just keeps on going So the Stern and JPMorgan Chase, pretty much a copy, same broker, same PBM. The last one is really interesting. This covers really non-ERISA lines, which are the kind of ancillary, voluntary, enhanced benefit lines, accident, critical illness, hospital indemnity, cancer.

25:29So this is, again, it's employees versus LabCorp and Willis Towers Watson. over six years, the average commission rate they were taking was 28% on those lines, and less than 50 cents on every dollar was actually going to pay for benefits. So they were overpaying for the coverage, they were overpaying for commission, and what the law firm that is representing essentially the employees in this case discovered is Willis, Tyler, Watson for similar cases like Home Depot. Home Depot was paying 5% commission on those and they were very similar in size. And that goes directly back to that idea of prudence, right? Obviously, the people at LabCorp didn't make prudent decisions. They didn't get disclosures. They didn't understand what they were doing. And that's what this entire case is about. So how easy would it be now for those law firms to just go find all the Willis Towers Watson's case and look for the ones they repeated that behavior, then that employer's tagged on to get the employees versus employer and broker.

26:40One important distinction with the ancillary lines that Donovan's talking about here, you might be thinking, well, if they're non-ERISA, why are we covering this on an ERISA lawsuit, right? There's a safe harbor attached to those, but it's very easy to violate and the majority of plan sponsors do violate it under an endorsement clause. So if you're endorsing these benefits in any way, meaning you have them in your benefit guide and that page also has your company logo on it that is technically considered an endorsement so point being you're not just because they're not a risk alliance doesn't mean that you shouldn't apply like donovan said best practice earlier apply the same due diligence process the same everything that you're doing for your fiduciary governance oversight to the non-erisa lines in case you are in violation of

27:27that safe harbor yeah i mean these are employee dollars and fundamentally the you know the plan sponsor the company is endorsing these products when they put it as part of the benefits package and if you look at you know 28 uh commission average and a 50 loss ratio those products were easily overpriced by 50 right we could have cut the cost in half and had the same coverages for employees so they're they're overpaying for benefits every paycheck you know over that period of uh five or six years i think that that they were representing this case hey we've got a couple questions for you guys on this topic um donovan how does like one how does someone approach a corporate benefits team of a self-insured plan to take this step as the big firm not getting paid

28:16a commission of the premiums how does a corp so how does the plan sponsor of a self-insured plan that's a big I'm not sure I understand the question um so the team has a self-funded plan the big firm's not getting paid a commission of the premiums so what compensation are they firm is getting paid a pepum admin fee so sometimes we think that's the case and not today actually yeah about about an hour and a half before this call that was exactly the case the employer thought they had. And what we've, you know, we kind of started with the case 30 to 45 days ago, we're getting all the discovery stuff is coming in. And then we're uncovering undisclosed lines that is not in their compensation. So what we found today was $2.50 for every single drug filled on the plan. So every month as employees are filling drugs,

29:17the broker is getting 250 that was not on the disclosure not disclosed to the employee not disclosed to the the plan sponsor at all so it's very often that we think things are one way and then they're not and then you know another great example of this is bonuses and incentives which they will never quantify for you so we'll say we could get additional overrides and bonuses you know based off basically retention and premium growth so for keeping you in the same place and for growing your premium we can get an undisclosed bonus and incentives we've also seen those brokers say we get lines of credit we may get lines of credit from the carriers we represent so now the carrier that the broker is selling is not only like one of the main clients of the

30:10brokerage it's also the bank that's providing them money it's a huge conflict and you can imagine how much now that carrier can dictate the terms of what they're doing not doing as a brokerage what i would highly recommend would be check out the lawsuits if it's one of the big three brokerages there's likely i mean wtw we're going through one with mercer right here on this slide aeons the brokerage and all the other ones if it's one of those um keep in mind a bunch of the other large publicly traded brokers are owned by one of those three so my recommendation would be to take those lawsuits and focus less on the per employee per month and more on the fact that there needs to be some type of forensic contract review and or what is our fiduciary governance process looking

30:54like to ensure we we know that these fees are reasonable um valerie happy to talk offline too if you if you want more um ideas another thing uh i love that they say you'll find these in the compensation disclosures. Most of the big agencies are providing them, but what they're doing now is they're saying all the ways they could have conflicts and additional compensation and misaligned incentives, they don't quantify them, which is the big problem. So a couple ways to clear this up. One is I would provide them with a 408B2, and that asks them to quantify every single one of those, which they do not want to do. They will push back and try and say, well, that's for 401ks. It is not. It is also for health and welfare plans, and you are asking them to do it

31:40as the client. So a 408B2 would ask them to quantify all those measures from all the different sources, and then also apply to you, like, what is the scope of services that you are giving me back in return for that? And that's really helpful when you start to see that increase year by year by year and you're looking at it and saying, well, you're doing the same for me or less, and I'm getting worse results and you're getting paid more, I would like you to do this now as well to take some of the burden off. I'd like for you to include ACA reporting. I'd like for you to include a data and analytics portal. I'd like you to include one-on-one enrollments for my team, right? Whatever it may be, if you start to see that in the 408 B2 disclosures,

32:25That's certainly something you can do. And then also the second part of that would be ask them to take a fiduciary standard of care in their contract, which should be a very low bar. All it means is I'm not going to have misaligned incentives with you, the plan sponsor. I am going to be 100% transparent with all the data and decisions and proposals that I put forth to you and compensation, right? I'm going to disclose all that compensation. So 408 B2 compensation disclosure could clear that up with your existing relationship to make sure you're on a good track. Kelly had a question. How does it change the story if the employer is paying all or a portion of ancillary options? If you the form, Lena, is 408 B2, and we actually will send a copy of it in the follow up email to the webinar.

33:18Kelly's question, though, about what if an employer is actually contributing to these ancillary lines that removes the safe harbor altogether. So now it is 100 percent, no question, subject to the same fiduciary standards under ERISA that totally negates the safe harbor. Yeah. And you also want to make sure you're not overpaying by 50 percent, like in this example. right? If you guys can cut that, you know, that expense in half, perhaps you can add some additional coverage, contribute more to their healthcare plan. So still best policy. The last thing I'll say on this, and then we can, we can move on is what we've seen just, I mean, we've seen it the entire time we've been in this business doing this work, but in the last few weeks, contracts that do not match the disclosures. So it's not just enough to get

34:08a disclosure, you really want to ask for that, specifically that PBM contract or the TPA contract or whatever it is where you, there could be that hidden compensation because we're seeing a lot of them in the contracts, but not actually being disclosed on the disclosure. So just another, I think, you know, the, the test of that, the easiest kind of test to, to figure that kind of stuff out without turning yourself into a benefits pro or a forensic accountant is the compensation disclosure and the fiduciary standard of care. So if they say, this is, yes, this is all my compensation. Here's the 408B2. And yes, I will advise in your best interest and be transparent with you. Then you shouldn't have to worry about it unless they are very foolish. Right. And those two things should be a low bar, right? Want to know how much you get paid and I want to know

34:56you're doing it for me. Yeah. Did you want to go through this or do you want to move on? No, that's it. Good. All right. So now that we've set the landscape about what are the problems, right? What is fiduciary duty? How is how are these lawsuits kind of playing out in real time? We've got that high level understanding. What does it actually look like to do it right? So it's less about believe it or not, it's less about making the right decision. And I say that with little bunny ears, because what is the right decision? This entire conversation around ERISA plan sponsor lawsuits is about a structured, documented, repeatable process. It's more about the process of decision making than it is making a good or bad decision. So the entire workshop that we're hosting and what you'll see is the primer for today is about how do we design a bulletproof audit ready process to show how we came to each decision,

35:56how we determined these fees were reasonable, how we determined these vendors are performing at the level that their contracts say or that we expect. That's what this is about. It's about the process, not about being perfect because you're never going to be perfect. And also, it's not about choosing the cheapest option. It's about choosing the right option for your population, for the business needs of that specific year and documenting the heck out of it. So this is what we've built over the last decade, as we've been trying to figure all of this out with our clients, is the best way to structure this fiduciary process is to have a quarterly governance structure. So that looks like having a benefits committee. When you think about a benefits committee, well, we'll dive a little bit deeper into it here in a sec. But if you don't have a

36:45benefits committee, that's a great place to start is formalizing the committee. Because like Donovan said earlier even if you don't right even if you don't want to formalize it the fiduciary responsibility is inherent in the fact that you're making decisions so it's there whether you have a committee or not you might as well have a committee where everybody understands the seriousness and the liability and also the opportunity to make an impact on those that you serve so here's a few things that we cover every single quarter with the clients that we have that are in our fiduciary framework. So number one, and these are all what's required under ERISA. So you could screenshot this and try to do it on your own with your own committees. That would be an amazing place to start. So number one is going to be vendor monitoring and plan performance. So there's

37:37a piece under ERISA where you need to monitor the plan performance and the vendors. I have seen this be probably the biggest area of opportunity besides the fee reasonableness component is a lot of plan sponsors when they think about the vendors they work with they evaluate them maybe a couple months before renewal right or a few months before the renewal conversation start where it's like okay yeah you know they responded to my emails and they uh you know they got us the renewal on a decent time and yeah they're great they're really nice that's not vendor monitoring you want to be setting kpis key performance indicators that you're tracking at these quarterly meetings to decide are they meeting what they said they would do in their contracts what performance guarantees do we have in place if they don't how are we holding them accountable

38:28what are our expectations the other thing would be planned performance even if you are not in a plan that gives you like to the penny accounting which by the way we recommend that you should try to get into plan designs where you have to the penny accounting on claims detail but even if you don't you still have access especially if you're using the gag clause ca compliance to really fight for what is rightfully yours your plan performance data claims data you want to be having financial conversations around how is the plan performing versus where most plan sponsors end up if there's not something like this in place they end up in a very reactive renewal situation where it's 90 days out 120 days out and you know we're just trying to figure out the finances never mind

39:18the rest of where we can make impacts so fee reasonableness and compliance so confirming that all the compensation to all the vendors is reasonable that is an ERISA guideline but also all the annual compliance the things you heard Donovan mention earlier not just the CAA of 2021 by the way there's a caa of 2026 that we haven't even talked about today um but at the workshop in august we will we will dive into that as well but like aca reporting 5500s picori fees right there's benefit notices there's a whole host of other compliance needs that need to be handled um you want to make sure that those are being discussed in your fiduciary process as well um strategy and viable solutions so this is the part where are we actually looking at other options and other options isn't the same three or four carriers on a spreadsheet every single year

40:09it's a lot deeper than that that you have to show hey we're learning about these things and we're not choosing them for this reason that's the documentation part and then the vendor selection and contract review making sure that you're actually running a real market check um and read every single contract i just posted a linkedin post like two minutes before this started because because I was kind of fired up.

40:33Already just in the last week, I've read two contracts and had meetings with vendors about the red lines that I requested that were in favor of the plan sponsor who's trying to be a good fiduciary. On this meeting, they're like, yeah, cool. We're good with all of those red lines. I'm like, awesome. Email comes through today with the return to contract. And all of a sudden there's a clause in there for an additional couple of years of engagement that nobody agreed to. read your contracts. I don't know how many times I can say that. But here is a structured sort of governance process. This is what you can talk about every single quarter. And you want to also have a fiduciary file. So this would be an online storage of some kind where you can house and

41:16document your entire process, which we will go way deeper into what that looks like in August. So like I said, your first line of defense is going to be having the committee. And that's the cleanest way to prove that you did the work. Because with a committee, you want to have a committee charter, you want them to acknowledge any conflicts of interest, and you want to take committee meeting minutes of every single meeting. That alone, if you have, if that's all you take away from today, if you have nothing, if you have none of this, that's an amazing place to start, that you've documented these conversations where at least we have some type of a process where we're evaluating our vendors, the reasonableness, and plan strategy. I highly recommend four your committee, consider some diverse experience. It shouldn't just be HR. You really want to have

42:01some financial minded folks in there, some operations folks in there. Different perspectives offer different questions. And that's something we'll talk a lot about in August too, is how do you ask different questions that will get you different outcomes at your renewal? So for example, if you're told, well, you had bad claims, right? Or your local hospital won't be okay with that plan if you go with that. What questions can you come back with to put you back in a seat of power where you're in control of the conversation? The documentation trail, that's that fiduciary file that I was speaking about. You wanna make sure that you have those minutes, you have all the compliance items documented and you have a rationale for why we chose what we chose for this past plan year, for example.

42:48So maybe one other thing I'd say, if you do nothing else than the committee, create a rationale for if you were a January 1st plan date, create a rationale and put it in the fiduciary file as the only thing you have that's fine right now for why we chose what we chose. What was the decision making process like? What was what else did we see? Why did we not pick this over this? And then risk mitigation will go into this in August. How do we protect you, HR, on the call who are personally liable for these decisions from any future issues? So you can get fiduciary insurance, you could have directors and officers insurance. If you have a self-funded health plan, you need to have a fidelity bond. Everyone knows about that for 401k, and oftentimes all it takes is adding some verbiage into your existing policy. So we'll talk through all of those best practices as well in August.

43:38And here's that question piece, right? So the questions that you should be demanding to your vendors. Will you disclose every source of direct and indirect comp? Will you provide full claims data? You want to own your data. That's the big thing as a plan sponsor. And that's what the CAA of 2021 actually says is real. Like that is something that you can do. You can own the rights to your data. But most contracts, if you read them, aren't working like that for plan sponsors. And guess why? because it benefits the vendor to have all the cards and for you to not have any. Fiduciary status. Will you acknowledge in writing what your fiduciary status is? And like Donovan said, when it comes to the consultant advisor broker relationship, will they operate with a fiduciary standard of care or not?

44:24And then conflicts of interest. What conflicts of interest are you, like we saw today, are you getting a per script fill fee that you didn't disclose on your disclosure, but we found it in the PBM contract? Seeing a lot of those. So this is just the surface right in the full pre-conference workshop we're going to talk about how to do forensic contract reviews where can you find those things that our team finds every single day in your own contracts you could even if you're going to attend the pre-con go ahead and print out one of your contracts and bring it it would be really fun to actually go through a couple of them live vendor benchmarking and kpis I have another slide I want to show you on that so So that in case you already have the committee, in case you already have your rationale, in case you do have your fiduciary file, the next step would be showing how you're monitoring your vendors.

45:14We're going to talk a lot about the PBM in August because that is the crux of a ton of these lawsuits. We're going to talk about how do you access your claims data if your carrier and everybody you're working with is telling you, no, no, no, no, you're too small, you're too this, you're too that. there's some legalese that you can use to get your hands on at least some impactful stuff like for sure your rxdc reporting would be a great place to start we're going to talk through some plan strategies that work so that you can check the box on the education and then we're actually going to do a hands-on self-assessment so by the end of the course in august you're going to be able to acknowledge it looks like this okay where are we on the governance committee side where are

45:57we on the documentation? Are we really leveraging the CAA the way we could? What is our vendor procurement process like? Do we have conflicts? How are they performing? What's our contracts? You will give yourself a score. And then the last part of the self-assessment is the very first thing that you can do when you get back to the office that you can actually make an impact. So you'll kind of walk away with a plan. There'll be three things. You're going to write down three of your next steps, but that first one will be what can I do next week? So you should leave with a 30-day action plan. You're also going to get our vendor scorecard. So we have a scorecard that we've built, and this is how we actually monitor every single vendor in the health plans that we

46:42manage. You'll get a copy of that, and we'll also teach you, depending on the structure of your plan, how you can change some of these to better reflect the contracts that you have in place today. All right. So in August, you're going to walk away with a lot more than what we covered today. Today, again, was that primer. But I hope this hour sparked something where you feel like either you're doing everything great and there's no room for improvement, but you just kind of got that like, yeah, good for me. Or maybe you're like, hmm, there's some work here to be done. I hope you'll join us in August. If you aren't coming to HR Florida, go ahead and give Ethos Benefits a follow. Guys, we don't just talk about this. This is literally our business model.

47:27So please don't be afraid to come and ask us questions. We love, love, love this topic. So please hit us up. And with that, I'll hand it back over to Lori. Do we have time for questions, Lori? Would it be okay if we opened it up? Absolutely. And why don't we have, we have two hands raised, but I think their questions might have been answered. And so Austin, I'll follow your lead. If you want to get a grip on where the questions are, I will quickly remind people, Chelsea and Donovan, when I first met them, I was blown away by this. I knew none of this. And I've been practicing HR for a long time. So, you know, that is why we ask them to do a workshop, not just another one hour program, because there is so much that they can bring to the table.

48:17So we would love to have you attend at HR Florida, but I can speak to how generous they are with their time. that if you are not near Florida, if you don't have any interest in attending HR Florida, which we hope you will, reach out to them because they will help. If you have already registered for HR Florida and have now decided you want to make sure you attend this workshop, you can simply go back to your confirmation email and add on the pre-conference or move up to the VIP level, which gives you the pre-conference included. So it's such a good deal. You just can't even believe it.

49:06So go ahead, Austin. Do you want to ask people who have questions? Austin, you're on mute, but I'll suggest something as like a kind of giveaway for the participants today. I've never done this. I might regret it depending on how many I get. But anybody that's on the call today, if you want to send me any one of your contracts, could be your PBM contract, could be your TPA contract, broker contract, broker compensation disclosure, send those over to me. I'll put it through our contract review, suggested red lines, areas of concern, suggested changes, room for improvement, that kind of stuff.

49:46My email's right there. You can connect with me on LinkedIn. Obviously, it's a contract. There's no PII, no PHI, no HIPAA. It's just between you and the service provider. You can redact it or I'm willing to sign an NDA and I will get you kind of a contract review on whatever it is you're looking at, concerned with, to kind of give you an idea of where you stand today and where things can be improved. to give everybody just like quick closing remark. I was working with a new prospect and I, they said, what's that form that I should ask my incumbent service providers for? I gave them the form and this was one of the largest broker trusts in the country. And they responded back, we only do this for 401k. So I say that because the people that you're working with,

50:34they might not even know about all of this. it's not always nefarious activity, right? Like we talked about hidden compensation and a lot of things like that. Sometimes vendors know that they're not doing well by the people that they serve. But a lot of the times it's really just, there's a gap in education and people don't know what they don't know. So you might find that you're the ones starting to educate your vendors on this, which is kind of interesting. So don't be afraid to send over those contracts. I think that's a great idea, Donovan. It doesn't take us very long. So please. Also, there's HRCI and SHRM numbers here if you want to go get your credits for today's session. And with that, are you offering this again on 622? No, no. There are that. Chelsea and Donovan are going, what?

51:26That is Mark Griffiths, another one of the pre-conference programs. Many people know Mark. I don't know. Chelsea and Donovan, do you know Mark? He's also in Orlando. He has the cutest little Irish accent, which is how everybody knows him. But that's his program. So this is a new offering as part of HR Florida is bringing you these webinars, getting everybody really excited about the actual conference and seeing what depth of experience we're offering by coming to the conference. Amazing. Well, if we don't have any questions, we will go ahead and wrap up. Thank you so much, everybody. And Lori, thank you again for allowing us to share about this topic with HR Florida. Oh, thank you so much. We really appreciate all the support you guys have given our conference for many years in the past. Thanks for everything. Bye, everyone. Bye, everyone.