The New Era of PBM Transparency. Webinar.

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

00:00Welcome so much to today's webinar. Today we'll be breaking down all the transparency differences in PBMs and what this new legislation means for your health plan, assuming you're a health sponsor, or a plan sponsor. So if you are, this can be super, super relevant for you and how this is going to change your whole world in the future and what you can actually do about it before it becomes an issue, a risk, a compliance problem. When it lands on your desk, I think that's what I went with on the slide. Let's go with that. So today is conversational. So what we really want from you guys is to be communicating the chat, ask questions, talk about stuff. We have an awesome, awesome presentation for you today. So we're excited to talk about it. So I have a little joke at the bottom there.

00:44And my hope is if you can actually make me laugh today, because usually I'm the one who makes other people laugh, I would love to just switch roles with all of you. So add a dad joke, add something funny. You get 10 points in whatever mysterious system that is of a point system, and it's all yours. So win it. Win the day. I'm going to go to the next slide, and that messes up. Okay. So today's webinar is approved for continued education credits with SHRM and HRCI. So at the end, we will throw it up on the slides and then also Talia will put it into the chat so you can easily copy it. There will be like a follow-up email as well and so if you didn't get it for any reason, you can just email me. The email will come from me anyway. So I'd love to chat and communicate,

01:31so feel free to send me an email and we'll get that sorted for you. So today there is actually four of us, so let's actually do the most important person, the MVP of the day. Talia Hansen is running the chat and it's our community manager. Talia, say hi. Hi, everyone. Thanks so much for being here. Talia, what's your favorite color? I'm a purple girly, but like a lilac purple and specifically that or the power punch purple, which was color of the year in 2018. I didn't know there were colors of the year. Yeah. Throwback. Throwback.

02:07That's awesome. I'm trying to think if 2018 was a good year for me, but let's not reflect on the past. Next up, I've got me. I'm in marketing for Ethos. So I get to be the face and the funny guy. We have Chelsea Ryckis, our president of Ethos Benefits, and our guest today is Jennifer Berman. Jennifer, you want to say hi? Hi, everybody.

02:30Nailed it. Followed it to the T, exactly what I asked you to do, so thank you. Okay, guys, here's today's agenda. So we've got some introductions I'm going to do in a second. terminology explanations, a little bit of fun that I'm going to add to the beginning. And then Jennifer is going to take it away. She's got a lot of insight to bring to the table today. And as always, we're going to do Q&A at the end. Also, though, if you've got questions, it's relevant and topical while we're talking about it, just throw it in there. We really want to talk to you, but we will create a dedicated time to do that at the end as well. So, all right. First up, we got Chelsea Ryckis. I'm just going to read this because I was really

03:06happy with it. Chelsea's philosophy is your benefits should work as hard as you do. Her other philosophy is brokers who don't act as fiduciaries should find a new career. Chelsea Ryckis, everyone, you want to introduce yourself? Hi, everybody. My name is Chelsea Ryckis. I'm the co-founder and president of Ethos Benefits. If you're on this webinar, you've probably been to our monthly webinar series. Hopefully, you can kind of see the value proposition and differentiation of ethos in the benefits marketplace. As Austin alluded to, we are fiduciary-based advisors and not just because it's a buzzword this year, but that's actually the foundation of our business principles and the way that we started our business over 12 years ago. So fee-based advising, work with mid and large market employers nationwide, and we have a proprietary in-house fiduciary framework

03:49that we take all of our groups through, which all the stuff Jen's gonna talk about today is going to apply heavily to those of you, especially those of you subject to ERISA and those of you that aren't as well. But yeah, thanks for being here. Excited to hear from Jen today. Yeah, when I first started Ethos, I thought it was more like the buzzword piece. Like, okay, cool, this is the marketing messaging. But it's exciting, even the topics that we've done with our webinars and even what we're doing today, how accurate and relevant it really is. We really don't, we try to avoid these conflict of interest, which we do everything that we can to be a fiduciary or a partner to the fiduciary and do the right thing for the employees and employers. So it is cool.

04:26I actually work for a cool and exciting company that is morally grounded, very fun. All right. Next up is our guest, the most important person of today. It is Jennifer Berman. She's helped hundreds of employers survive the fever dream that is employee benefits law. And she still likes it somehow. You know, I think we have a very different personality, personalities, and I appreciate you beyond belief, Jen. um so you're you know you're a leading employee benefits attorney entrepreneur um and you think that federal regulations are fun so um you're you're the coolest person ever jennifer if you want to introduce yourself please take it away thank you um yeah so i'm jen berman chief legal officer here at loom light and i do i love compliance um but i i still like to think i'm

05:15cool um although my teenagers strongly disagree um but once like chelsea was nodding there fun at a cocktail party, maybe. But I do. I really like to try to take things that are seemingly complicated and make them accessible. And hopefully that's what we'll do here today. Yeah. Amazing. All right. Well, before we get into the deep insights, let me just ruin it for everyone and try to explain how I think this topic is going to go. Something that I think is really fun for me. I'm in marketing. And so if you've ever dealt with a marketing vendor, or maybe you're a marketing agency yourself, but the terminologies are crazy. I think all of the abbreviations that I use on a daily basis becomes a bit obscene. And with learning how this whole healthcare system works, the amount of abbreviations and terms I've learned in the last

06:09eight or nine months that I've been with Ethos is actually, you know, it's Trump's marketing in every way. So you guys really take the cake on confusing terminology. And so I'm going to try to explain from my perspective what all these words mean. So if you're anything like me, I hope you enjoy it. First up is the PBM. This was a fun one to learn because no one ever has told me what the abbreviation was. I had to Google it. Appreciate you guys. What this actually was to me was the middleman that your middleman hired. It's like another fun extra step. So all of these extra little fun things we do. Fiduciary duty. So I think I understood this somewhat from like a governance standpoint or just anyone's kind of like 401k. But what this really means here is

06:53it's a legal reason. You can't just Google it and move on. This is how it applies to you guys. All right. For plan sponsors, at least. I don't know about all you guys. Rebate pass through. This was something I pulled from your slides, Jen. And I still don't know what this means, but this is my explanation of it, which is it was money that was yours the whole time. So get that money back, baby. Okay.

07:18Indirect compensation, which is, I guess there's direct and indirect. That makes that really fun. It's money that changed hands in a way nobody told you about. So yeah, I like, I'm kind of more of a direct compensation guy, but that sounds fun. I think that's great.

07:35All right. Covered service provider. I think most people would just refer to these as vendors, but here it's anyone making money off your plan. So that's everybody, it seems. Literally everyone. This one was my favorite when I first was learning health insurance, which was stop loss, which I was just blown away that there's insurance for your insurance because of insurance. And I've even taken out an insurance plan on me saying that this is insurance for your insurance. So and then we'll insure that. And the webinar is insured as well. So the whole thing is insured. And finally, plan sponsor, which is hopefully a lot of you in the webinar. So it's you with more liability than you realized when you took this job. So that's us just trying to highlight the biggest, the biggest piece.

08:20It's really good. It's really good. Like, why? We don't even need to do this at this point. Austin just nailed it. And so I think we, I hope you guys have a wonderful day. We'll catch you next time. Click. Bye. Awesome. Thank you, Austin. Absolutely. All right. Let's take it away, Jennifer. I will control these slides, but it is all you, my friend. So we are going to talk about the Consolidated Appropriations Act of 2026. This is new law. It passed on February 3rd of this year. Little tip for you. We only pass Consolidated Appropriations Acts at this point. You just have to pick which year we are talking about. Why is that? Well, because these are the things that are necessary to keep the government open. So sometimes we get other things in them, but literally these are the budget bills.

09:06They keep the government open. So they're all called CAAs now. It's true. All right. So this particular CAA, the CAA of 2026, includes comprehensive pharmacy reform. And we are talking about PBMs, pharmacy benefit managers here. and specifically the contracts between plans and PBMs, what can go in them, how they're going to work moving forward. So this new law governs what can go in them and limits the ability for the provisions related to them moving forward. So it includes a few big pieces of it. Transparency requirements moving forward, annual disclosures moving forward, and rules around rebates and discounts moving forward. So multiple big blocks all related to this sort of PBM

10:12and the contracts that we can have with our PBMs, that plans can have with the PBMs on a go forward basis. So this is not today law, it's moving forward law, and it's applicable to the PBMs themselves, fully insured and self-funded plans, ERISA and non-ERISA plans, and both large and small employers. So the disclosure requirements are gonna be different based on the size of the employers, but the fact that this is going to happen isn't going to matter regardless of the size of the employers, all right? So there's a lot going on here. Okay, so what's special about being large moving forward? First off, how do we count? All right, so counting rules, it would be so much easier in this world if I could say like, this is the rule for being a large employer

11:00and this is the rule for being a small employer. That is not the case. I have been threatening for years, but I'm gonna do just like all presentation on counting rules and I'm gonna have like the count from Sesame Street and it's gonna be amazing. But I would have to, that would require me to actually memorize all of the different counting rules and I'm not sure that I could handle it because I have to look them up and remember them for any given presentation at any given time. So it's unlikely to happen. All right, so what is a large plan? What's a large employer for purposes of this new rule? So a large plan is one with a hundred and more participants. A large employer is one with a hundred or more employees. And both concepts are gonna come up under these new rules.

11:46And then there's going to be one set of rules for self-funded plans moving forward and one set of rules for fully insured plans moving forward. For self-funded plans, automatically PBMs are going to be required to provide reports. And they're going to be automatically required every six months. And then they're going to have to be available quarterly if requested. for fully insured plans, they're still going to be the case that an employer plan sponsor could get them, but it'll be an opt-in. So if you're fully insured, there will be a right to disclosure, so there will be an opt-in right to disclosure. So we're still in the large market, and there are going to be much more detailed reports than in the small market. So that's kind of what very big picture these disclosures, like the right to the disclosure. Automatic if you're

12:39self-funded, opt-in if you're fully insured. What's going to be in the large plan report? So this is information related to prescription drug usage, pricing, compensation, and discounts. What type of information are we talking about? The types of drugs for which claims were filed, the compensation by channel, brand name versus generic drug usage, out-of-pocket spending by participants, and total amounts received from rebates, fees, and discounts. Now, that's kind of a little bit confusing because we're going to see in a minute, rebates are not going to even be allowed anymore, and there's going to be a whole separate rebate rule. So what does that tell us about how this law was written, different pieces of different statutes and different components of different statutes are pieced together. This is very, very common in statutory frameworks. And when statutes are being drafted, you'll have a piece of one person's agenda in one

13:40part and a piece of another person's agenda in another part. And so when we sit down and start interpreting statutory language, you'll say, well, Jen, this doesn't make sense. Why does it say here the amount received from rebates is going to be there? And over here, it says rebates aren't allowed. one guy drafted this and the other guy drafted that and then we pieced them together and what got passed we didn't know when they drafted this disclosure requirement that that other part was going to get passed so it's not at all surprising to me to see things that don't entirely make sense together in the same place so in any event these are the things that are sort of all anticipated to be included in what will eventually become this disclosure to plan sponsors Hey, Jen.

14:19I have a quick question. Oh, there we go. Right? So we have a question in the chat from Stephanie Perino. It says, do you anticipate large carriers that own PBMs are going to find a way to negate these disclosure responsibilities? And interestingly enough, I just saw an article from the CEO of one of the large three PBMs that was like, we're so excited about this. We've been doing transparency forever. which if you are familiar with the market, that's not the case. But yeah, how do you think that specifically the big three that are vertically integrated are gonna handle these requirements? I think they're going to sue, which will be very, very interesting. I don't think we're going to see comprehensive disclosure on schedule, all right? And also note the schedule is a ways out, right?

15:09So I'll get to the detail in a moment. but the schedule is that these will be for contracts effective after August of 2028. So this is a ways out still. And I do think that we'll see all sorts of ways to worm in out and through these rules. So I would be shocked if we see the big three complying with these on time.

15:39So yeah, I don't think we'll see full compliance in the way that the statute and the lawmakers who created this necessarily anticipate. And I don't even know if they anticipate it, right? So rulemaking is an iterative process always.

15:56Thank you. So what else is included? An explanation of the design features that are used by the PDMs related to their own affiliated pharmacies, including the total claims dispensed through affiliates and detailed lists of drugs dispensed through their affiliates. So we've got a little conversation going on asking about who those big three are. And so we see a lot, so there we're talking about Optum, ESI, and CVS,

16:33but they are affiliated with their own plans as well. They have major carriers associated with them. So we've got situations where major carriers own PBMs and own pharmacies as well. And so when we start talking about reporting on the affiliates, this is the lawmakers knowing and understanding

16:55that many times you've got the PBM, who is the middleman, also owning, having a relationship with the plan, the carrier or the TPA, then being responsible for administering those contracts and then also owning the pharmacy and so here we see that the lawmakers who created this transparency rule said hey if you happen to own the health plan own the administrator who's responsible for these contracts and own the pharmacy we need to understand where all those dollars are going in those relationships as well um no surprise to you jen but a lot of the times when we're working with prospective employers who are in this vertically integrated model we do a pbm analysis and no surprise here you know all of the a lot of the spending is being put to pharmacies that are owned by the pbm especially specialty drugs we're seeing a shocker yeah where there's just

17:54uh there's that direct um that direction and that direct pathway um it's very very problematic exactly so so certainly you know there's an understanding at least a high level understanding by the lawmakers here that this is happening um and at least you know that planned fiduciaries should should have the data necessary to make decisions related to this um and so when we we talk about how much and will this information then get reported out, the law is now saying, yes, it needs to be reported out. So we want to understand the total claims dispensed through an affiliate. So if the PBM, PBMs are really the ones, middlemen to the middlemen is a great, great, funny definition, but they're the ones responsible for administering that contract. So if they are both administering the contract, responsible for the contractual relationship,

18:48but then also own the entities for whom they're administering the contract, what this is saying is, okay, well, fine. I'm going to say great. Fine. Tell us where those dollars are going. We need to understand that. So that's what this is saying with respect to that piece of this rule.

19:08All right. So with that in mind, what do we need to know about every plan, regardless of size? Well, with regards to every plan, so now this is down to the smallest plan, there needs to be a summary of all of the data. So we want to know all of the data provided to the large employer plans, what's going on. And all plans also have to annually notify participants of the PDM's obligations related to providing reporting, summary information, and the participants' rights to request information. So now that detailed data that's being reported at the large employer label, the summary data needs to be at every plan size. So there is an understanding, it doesn't matter if you're a small plan, there is high level data that needs to be provided regardless of plan size. Okay.

20:03Let's talk about rebate pass-throughs. thing I want to take a minute to look at is this definitions. Rebates, fees, alternative discounts, and other remuneration. So what that's getting at is there's a whole lot of money related to the drug coming from the manufacturer that can go back in some way, shape, or form to the plan or the PBM or any number of middlemen in between. So we've got all this money that could be received from somebody, usually related to the manufacture of the drug, that's the middle circle here, related to the utilization of the drug or the drug spending under the health plan. So basically, manufacturer people who create the drug are giving back money in an attempt to make sure you pick that drug. Or the formula. Or the formula, yeah, using that.

21:13And so somebody's trying to get you to pick that drug or put that drug on the formula, and there's money associated with trying to get that drug used. And that money could go to any number of players in the system. the CAA now says that money has to go back to the plan, not to the PDA.

21:40It's a relatively simple concept when I say it that way. All the different types of, dare I say, kickbacks need to go to the plan, regardless of what we call it, whether we call it a rebate fee, alternative discount, or other remuneration. Chelsea, how many different ways have you seen that hidden?

22:01We used to have a slide in a presentation that literally showed 49 different ways that that money specifically is hidden. So, and I'm sure there's more. I'm sure there's more. I'm not sure if rebates fees, alternative discounts, or other and other remuneration is a broad enough definition or not. I can tell you really smart lawyers are really good at wiggling out of it. But end of the remuneration is meant to be a catch-all. Yeah. Well, and I highly encourage the plan sponsors on the call to also look at the definition of a rebate in your contract, because the way that they are defining it usually is very, what's the word I'm looking for, Jen? It's kind of like a catch-all. It could be literally anything, then you would have no idea where it applies. So definitions are incredibly important in contract language.

22:54What this says is PBM must remit 100% of rebates to the plan. They can't keep them. This is a huge, huge, huge source of revenue for the PBM. It's going to change their business model. This is like three words in the statute as opposed to many, many, many, many words related to the disclosure. I actually work with, I have a number of many clients who are PBMs, not the big three, who, you know, doing the comp disclosure pieces is a lot of work for them. This changes the whole model. This changes everything about their business model.

23:37And it's really where the game is. And it will be a major, major change. It will be a major change. I also think it'll just allow plan sponsors to focus on what matters because I can't tell you how many plan sponsors I speak to that like think they're in a great contract because they get 100% rebate pass through, but they're not actually. And they're not really focused on all the other. There's, I mean, hundreds of other ways to. The fees, alternative discounts and other renumerations. Exactly. Yes. So it's like it's like the little carrot that's dangled and you think you have this kick ass contract when in reality you don't. And you've just sort of it's been like a little shiny object to put your attention over here when there's a bunch of weird stuff happening over here for lack of a better example.

24:31So, I mean, this is this is the piece of this that will change the industry. this is this this is what will change the industry um the the compensation disclosure is big um and understanding what it means will be big um but but but this is this this is so jen i wanted to save this for the end but we're getting a bunch of people in the chat engaged in this which and they're saying so how are pbm's gonna you know shift and adapt to this and are they going to be hiding money in other ways and can they charge a management fee in instead of this? What do you foresee them doing? Yeah. So I think that the good PBMs will charge management fees. You know, we'll see cost plus, obviously, it become a much bigger part of the puzzle where they just,

25:16you know, they charge the cost of the drug plus a fee and or just a straight management fee. I mean, there are many, many legal ways to do things, but it's not necessarily going to be directly tied to the actual drugs being used or incentives related to the drugs being used. So I think that, I mean, the main driver, the main concern with this is,

25:52quite frankly, you know, driving towards higher cost drugs in an attempt to get, you know, better incentives from those manufacturers, but over, you know, to get those middlemen, better incentives from the manufacturers, but ultimately costing the plan more money. And the more transparency, The more clarity there is around the compensation for the service providers, the less that happens.

26:22Thank you. Okay. So, how do, and now I'm going to go to the short form use of the word rebates because that other definition was a mouthful. but when i say rebates for the next five minutes i mean rebates and blah blah blah blah all other forms of remuneration how do these rebates get paid to the plants um they need to be paid back to the plants at least quarterly moving forward i'll pause briefly chelsea when you do get rebates paid back to your plans how often are you seeing them right now i think it's annual if that like Like if it's coming. If you're getting them, you're getting them pretty irregularly, right? And some are more often than that, but very rarely do they actually follow the agreed upon schedule.

27:19At least quarterly. When they come back, they are plan assets. And there are some things we can do with the plan assets. So if the employee contributed to the plan, payment has to be a plan asset. This does not mean that the rebate has to go back to the end user who generated it. It can be used to offset plan cost or for the benefit of plan participants in general. This does not mean you have to have a trust. There are ways to do it. It can be treated and attributed to employer contributions in ways that we can sort of draft around it. But it's important to remember that we are dealing with plan dollars. dollars and then with respect to fully injured carriers those rebates go back to the insurance carrier so key key component here is the rebates are being used to offset and lower the cost of

28:13the plan itself so there should be a direct correlation between the rebate dollars coming back to the plan and the overall cost of administering the plan going down we should be able to draw the line and be able to see that

28:29Great. Plans can demand an audit once a year to verify the remit payments and they have the right to select the auditor, but they do then pay the cost for the audit. I know it's super easy to audit plans, right? Especially PBM audits.

28:48I said no one ever. No one ever. And you don't have any issues getting that data that you need when you run that audit. No. Yeah, we actually have an audit arm here at Luton Light, and I don't ever spend any of my time fighting with folks on that. That's definitely not an issue for me.

29:11Yeah, okay. Well, that's going to be easy to change. All right. I want to pause for a second and see if we have any more questions than that before we go to my new favorite topic. I know you like this one too, Chelsea. but um um did we get to valerie's second question will this reduce the number of remate rebates fees and alternative discounts um i don't think we did so will this reduce the number of rebates that we see from the manufacturers i'm i'm almost certain that it will right so um that that's more of a kind of existential business question but i'm sure that um i mean business practices will change um and you know part of i think what drives the whole rebate thing is that you've got lots of middle folks who are driven by the rebates um whose activities and practices are

30:00are motivated by them um and so you know chelsea you called out rightly so formulary designs and how often formularies are influenced by rebates well um those formularies are being built by the pbm it's not by the plan sponsors um and i think that those rebates have a lot to do with how the formularies are designed so i think that's a great example of something that we'll see change um what do you think well we're interviewing um mark cuban actually next week and i've been like watching a lot of his podcasts and his whole thing right now is like hey plan sponsors you make the formulary not the pbm and like them taking a lot more ownership of that um which i think is super super interesting also jay's comment um i really like this and

30:45jen i'm curious on your perspective um jay getford by the way guys um he's with cold pepper rfp runs independent rfps really amazing process he said in retirement plans these rebates are called revenue sharing and they can now be directed back to the individual investor do you eventually see these rebates going to the individual participants even though we know they don't have to right now but do you see that being something down the road

31:10Probably not. Going back to the individual participants, I think that I see that really hard. So the individual participants in health plans don't end up bearing the load of the cost of their drugs in the same way that the individual participants in a retirement plan have sort of the direct relationship to that dollar. So in a retirement plan, when you make the investment, there's a real direct correlation between an employee's dollars and what's going on with their dollars.

31:47The risk is much more spread in the health plan. So like if I'm the high dollar claimant, I'm still only taking 100 people on the plan, one one hundredth of the cost of the plan is being borne by me, even though I'm responsible as the high dollar claimant for maybe 50% of the cost of the plan. So the rebate really does need to come back to the plan as a whole, because I'm only responsible for one 100th. I only pay one 100th and maybe, you know, my cost share. So it's a very different set of economics and health plans than it is in the retirement plan context. But it's a great question. yeah super interesting um did you already i was responding to a comment and i wasn't paying as much attention as i should have did you already go through this expanded compensation

32:35disclosure slide it was no i was gonna i paused to finish up the pbm conversation this is my favorite and i wanted to yep yep i know i think i said we're gonna pause before we get to our favorite topic okay good now we are gonna turn to our favorite topic oh boy do i get into this expanded compensation disclosure thing. And here's the other, here's the doozy on this one before I talk about it. It's effective today. Although I don't think any of the industry has caught up with the fact that it is effective now. The compensation disclosure rules changed effective with the passage of the caa 2026 so the caa 2021 created arguably broker i mean definitely it created broker disclosure rules um so the broker disclosure rules related by 2021 rule um were then

33:36expanded by the 2026 rule and what the 2026 rule what did was to change like i'm gonna say maybe 15 words maybe less in the 2020 brown rule i mean it was very surgical okay in what it did and it went in there and it made it clear um and so some people argued that it wasn't clear before so we'll just we'll give them that chelsea doesn't want to give them that i'm gonna give them

34:08made it very undeniably clear that the compensation disclosure rules apply to tpas pbms um folks providing guidance related to stop-loss carriers medical management and other add-on services so now if you are providing services in this industry to a health plan you are a covered service provider and that means that if you are getting more than a thousand dollars in compensation related to that health plan you are subject to the compensation disclosure rules do you like it i do i do like it and i have some commentary on this uh whether it adds value or not, I don't know. I just genuinely am so surprised. This is not a thing. And so I listened to Jen give a presentation similar to this a couple months ago, which is why we invited her on the webinar because I learned a lot. And when she said this, I'm like,

35:12there's no way. So I go up to her after. I'm like, no, no, no, no. Like we've been holding every TPA, every PBM, every service provider to this, making them fill out the 408B2, like no negotiation, like you fill it out or we don't hire you. I just thought it was, it literally applied to every service provider. I genuinely didn't realize because we don't partner with vendors that are skirting the rules, right? I had absolutely no idea that this was happening at the level that it was happening enough so that it had to be rewritten. So very, very interesting. Definitely the case that it had to be rewritten. um the why it had to be rewritten is that it said broker and consulting services related to and then it had this list um and so lots of folks said well i'm not providing brokerage and

36:04consulting services related to third party administration or pharmacy benefit management or anything on this list i am these things and therefore it doesn't apply to me So they have now changed it to say providing these services, including brokerage and consulting services related to. So let's talk about what that means for plan sponsors on the call today. I know that you'll talk about when this goes into effect, but when it does go into effect, and even now, best practice should be that before you're making your renewal decisions, prior to renewal decisions being made, that you are understanding the compensation for every single vendor in your health plan, indirect and direct. uh direct like austin kind of alluded to is usually those like reasonable fees not only do you need this but you need to also determine if it's reasonable which is a whole other thing under

36:54erisa um but the indirect compensation as well right bonuses trips commissions things of that nature um jen any comments on that absolutely the case um the other question um that has come up a lot lately is what if i plan sponsor don't have the contract um that's another form of indirect compensation so um where maybe like the third party like what about when the tpa has contracted with

37:24the medical management company the disease management company the telehealth company um if they are being compensated related to your plan that's another example so i don't really care in that circumstance if you're getting the disclosure from your tpa you know or if you're getting the disclosure direct from that third party vendor but you you also have the entitlement to the to the information from them as well and this also we'll come back to this at the end but this process alone is reason to really have um like a fiduciary file we call it internally our fiduciary framework we have a portal and all the things that we take our plan sponsors through and it houses all this information but if you don't have something like that um you know in addition to committees and due diligence processes you really want to make sure that you have all of

38:10this on file and i love what jen said about like the downstream consequences right like for example busy season sometimes tpas will hire third parties to help adjudicate claims if you have a contract with that tpa but there's nowhere in your contract language that talks about performance guarantees for that third party that they're hiring there's all sorts of downstream impacts that happen that need to be considered for contracts and also for these compensation disclosures i i'm a great example right so loom light is a um we don't have this specifically listed here but like loom light is a consult is a compliance service so super easy with respect to when we contract directly with the plans our our contract has all of our compensation in it but when we contract with the with the tpa

38:52um you know making sure that that tpa is disclosing how we are compensated to them program. It is something that I am, you know, very focused on now as our chief legal officer is, you know, how do we make sure that the full disclosure is being made to the plans? Because the plan sponsors entitled to underway. I want them to understand how we are compensated, but making sure that that information gets through to the plan sponsor. Yeah. And a lot of the times you'll see in that admin fee, right? A lot of the times with the TPA, they're bundling in med management or concierge services or whatever else um into that number nobody knows so yeah this is really good points oh we gotta keep you have things like we move we have a ton of comments and questions in the chat you can pause here i know that there are

39:43more slides later about proposed pbm rules and stuff like that those are less important than this is so so from stephanie perino she is wondering if any of these regulations are going to change the expensive medications that are being billed to the medical side of the plan that realistically could sit on the pbm side like an infusion or any of those other therapies

40:08um that's an excellent question so are we going to see um folks move um the expensive medications from the RX benefit to the medical. So I think it's the inverse, any of the ones that are on the medical to the RX side.

40:34Well, that would require that information to be just, that would require more disclosure about the ones that are on the medical to the RX. So I wouldn't necessarily, so the reason I inverted it in my head is because if we move it from the medical to the RX, that would require more disclosure about something rather than less. We already have the disclosure required on the medical. So, I don't know what the driver would be to move something towards more disclosure rather than less would be.

41:07And then we do also have a question from Steve Gonzalez confirming that compensation disclosures are going to be required for any benefits provider, like voluntary benefits, payroll deductions, health savings accounts, DPC memberships, health shared arrangements, all of those? So the 408B2 piece is for group health plans that we talked about. So that's a group health plan requirement. So the medical dental vision or group health plans. Now, voluntary benefits and the broader definition of ERISA benefits, I would strongly recommend that any fiduciary require that information. That's part of what we're seeing sort of in the Schlifter-Bogard lawsuits and stuff like that. So to be a good fiduciary, you need that information. So I would demand it anyway, but it's not a 408 B2 mandatory disclosure based on this sort of CAA requirement that we're talking about. The CAA requirement that we were just talking

42:03about is only for group health plans. However, the fiduciary requirement to know how much you are being charged and make sure you are not being charged more than reasonable compensation applies to any ERISA benefit. And there's a whole conversation around voluntary benefits and whether or not they are ERISA benefits. I would proffer that they almost always are, and therefore you need that information there. And then there are some benefits in between life insurance, like automatic, like not voluntary, just plain old employer life is if you're in a RISA plan. So that is a whole long way of saying, know how much you are paying people. Thank you. And you're welcome.

42:49That's a great answer. I thought you promised to read all questions in an accent, Talia. I don't understand. Jen, I know that this is going to come to us as no shock given the recent lawsuits. And everybody, we will have a webinar on this specifically, actually. But a lot of brokerages are hiding compensation in the voluntary benefits. because for these reasons they can skirt disclosure requirements so it's super super important we've seen some crazy crazy stuff that i'm going to do a podcast on um but it's really important that if you're taking this level of scrutiny with your pbm and your tpa and stop loss and all that that you're doing the same on all other benefits it's best practice like jen said for whether it's a risk of plans or not um there's a really interesting question if you are fully insured

43:32plan can we ask for a comp disclosure from the carrier or does the broker have to give them that and also if they don't get so let's say you ask your um let's say somebody asked the broker for compensation disclosure and they refuse to give it can they get it from the carrier to understand what that broker's called yes for comp disclosure from your broker and the broker refused to give it get a new broker is my answer but can you get a comp disclosure from the carrier um maybe maybe uh depends on the carrier some will some won't um i it's a big old it depends it depends on how they're structured and if they've got it built into their system it is not the carrier's responsibility to give you that compensation disclosure and then like what if um other vendors for example refuse and it's not just

44:27broker right i mean like actual action that um plan sponsors can take i know that's not this is not let me just be very clear on this so a failure to comply with this could be a prohibited transaction but the prohibited transaction is on the fiduciary this is not a requirement the way that all of this is structured and it's very confusing so to be a party in interest so to get money from a plan um basically you're prohibited um so to get money from a plan so ultimate and then there's so short Let me taste it.

45:25This rule, this rule is on the plan sponsor. The plan sponsor is required to make sure that they have complied with this rule. It doesn't directly bind the entities being listed here. It directly binds the plan sponsor to make sure that they have this information. That being said, there is another concept in ARESA at play. So this is all about plan sponsor has to make sure they have this information if they don't the plan sponsor is out of complaint. However, there is another ERISA concept called a prohibited transaction that says in order for you to be paid, if you are a party in interest who is providing these services to a plan, you must be, you can only be paid reasonable compensation. If you are being paid something other than reasonable compensation, it's a prohibited transaction.

46:15So there's an argument that failing to comply with these rules as a broker, one of these third-party service providers, something like that, is a prohibited transaction. And so because of that, you're in compliance. In fact, when you look at some of these lawsuits that have made it a little further along, and this just happened, I think, this week in the Wells Fargo case, a couple of the pieces of the Wells Fargo case were dismissed. but the one that is continuing to go along as the prohibited transaction piece.

46:46And so that's a little bit of a stronger case. So like the thing that could survive is this prohibited transaction and that not giving the compensation information could be a prohibited transaction against the broker, covered service provider, something like that. But what's going on here is actually like if the covered service provider isn't giving the information that they need, that's actually on the plan sponsor more than it is on the covered service provider. Okay. The prohibited transaction argument is the better kind of lever from a legal perspective against the covered service provider. But you don't need a legal bludgeon against the covered service provider. You have your pocketbook. And your pocketbook argument is the best argument you have of all. Do people still say pocketbook? I don't think so. No. vote with your dollars is like the new were saying but i hear what you're saying my grandma said it

47:46and then my mom said it no i say it and then i said it and i was like oh that kind of like oh man how old am i yeah um we had a question about determining reasonableness that is a great question it's a great question so the first thing i'll say is reasonable this doesn't mean cheapest absolutely first and most important um second thing i'll say is it's all about process um so it's about having looked at it and evaluated it and talked about it so if you can prove that you looked at evaluated and talked about it you're good um it it benchmarking is rough in this industry it's hard to know the right answer to what a benchmark is um so the scope of services varies so greatly And that's why, you know, you could look at a, let's say a PEPM with one consulting brokerage

48:42or advisory firm versus another, and they're completely different, but one's doing compliance and nurse concierge services or, you know, whatever, a bunch of stuff in house, employee communications. And then the other may just be strictly advising on an RFP. So you really need to get into the nitty gritty. And like Jen said, it's just documenting the decision that you're making. And the fact that you, by the way, guys, it's never going to be an apples to apples comparison when you go through these situations. It's always apples to oranges. And that's why you really, really have to look at it and have that process. Right. So the super secret, like unfulfilling answer is that from my perspective as a compliance person, I want to know that you looked at it, thought about it and understood what you were looking at.

49:23I don't actually care how much you paid. Yeah. And Donovan had a good comment tying the compensation to the scope of work through a 408B2. So if you're evaluating a bunch of different vendors and you request the 408B2, look at that alongside the scope of work or the contract, and then from there determine the differences. It's much more about that than it is about the actual dollars. Right. Yep. awesome you guys want to do future slides or yeah you can you can you can go through um this is more detail than we needed to get into i think we covered we covered the comp disclosure piece um yeah we can keep going there we go implementation dates i mentioned this but i do want to i want to i want to lean into this um the pdm disclosure to the first day of land year on or

50:16after august 28th um i should fix that it's not the plan year it's the first day of the plan year honor after the contract year starting after august 28th i know wow that's super complicated it's honor after you signed your first contract with pbm after august 28th that's close it's in

50:38within 2028 probably 2020. all right it is close though because i mean think about it the especially larger plan sponsors they're already doing 27 you know they're starting budgeting for 28 so for sure violent on the effective date for this new comp disclosure new not new depends on who you ask i think chelsea was probably right but i have to be more generous because my job is to squint at things because i'm a lawyer um it's it's now yeah but the law is silent on it so it's now so if there's somebody on the call um or multiple plan sponsors on the call they're like yikes we just did our renewal january 1st we don't have any of this what's your recommendation for them well january 1st was so it's pre-renewal so it being now means you need it before your next

51:24but even the even you with the service provider disclosures you you don't think that it would be best practice to request it oh it's always best practice to request it and understand what's happening so it but it needs to be for your next reel got it right okay there are slides

51:45no i know another webinar i i we put it's good so super secret i have another lawyer you know like i have an associate she put together these slides um there are also dol proposed regulations on pbm disclosures that they came that came out in january on january 20th um and they're waiting for um comments that are due april 15th of 2026. um i am not worrying about them right now because they came out remember when i said the caa passed february 3rd they came out like two weeks not even before the caa they cover the same general topic general subject area i'm not going to try to teach all of this to you i'm certainly not going to try to teach it all to you in the next five minutes because they cover the same material you don't have they're not the same i don't think these

52:39will get finalized i think they'll use the comments that they get on this plus this to try to create the regs for the new statute okay because it's covering the same material that's why i told austin to not panic about how many more slides we have left. I am panicking. I'm scared. There's always a secret agenda when you're with them.

52:58You never know what's going to happen. You never know what's going to happen. So we're going to not stress about the regs until they give us new proposed regs under the new statute. I like that. And we'll have you back. Absolutely. I'd be happy to come back.

53:12Okay. I'm going to skip ahead. Chelsea, do you want to do your slide real fast? Yeah, sure. Very quick. my kind of thought process on all of this, it's very different than Jen because Jen is like compliant. She's an attorney. She's, you know, she's absolutely brilliant. When I am looking at this, I just look at it through a fiduciary lens, whether you are subject to arrest or not, it's doing the right thing actually saves you money, which is really cool in this industry. And plan participants get healthier. But my big kind of summary takeaway is if you don't have a process, it's going to be really hard to understand and see how these regulations that are being passed, like how is this actually pertaining to my current plan? How do I know that the right things are

53:54happening? So here's just a reminder of the four pillars of fiduciary duty. You really, really, really want to know that there's personal liability associated with fiduciary governance under ERISA. So not only is it the right thing to do, there's personal liability on the line, but just having a process, having due diligence, having prudence. If you have questions on what that looks like, let me know or let Jen know. Both of us are super nerdy about this stuff. But if you really want to maximize all of this stuff with the legislation and the PBM reform that's happening, you need to be working with aligned vendors that are not going to be trying to skirt the rules, that they're actually going to be trying to help you save money at the end of the day. That's my last takeaway. Jen, what do you think?

54:38You're here. Amen. Any closing thoughts? Absolutely. We do have a quick question in the chat, if we have time for this last one. Would contractual and invoice disclosures suffice for the plan sponsor's purposes? 4082, they can, depending on what they are. It doesn't always have to be a full-scale 4082. I think for a broker, it should be. But if you're just talking about like a, you know, a sort of a line item vendor, it can meet all of the requirements.

55:13Awesome. Any closing thoughts for us, Jen? This stuff can feel overwhelming. Sort of we recognize that, we know that. There's a lot to watch out for. But I would reiterate what Chelsea said. A lot of this is it also has to do with kind of doing the right thing every day and if you keep that as your as your north star um it can be digested awesome you are incredible thank you so much like so are you my pleasure yeah we really appreciate you joining us today jen everyone thank you so much for hanging um please connect with us on linkedin i have some contact information here if you have questions for chelsea or jennifer i know you really want to email me so go ahead and just do that and we'll just jump to that point so

56:02um thank you guys so much thank you talia you're the best mvp of the webinar every single week and as always we're committed to staying on time oh uh 11 59 my time sorry almost to 1 50 p.m right 1 59 p.m for you guys thank you so much we'll see you next time hi everybody thanks