The Consolidated Appropriations Act of 2021, usually shortened to the CAA, is the federal law that brought basic transparency rules to employer health plans. Donovan Ryckis, CEO of Ethos Benefits, calls it the first thing any employer should learn. He walked through why on The Inside BS Show with host Dave Lorenzo and his co-host, in an episode about a fiduciary approach to employee benefits.
His summary of the law: it set minimum standards for what an employer has to do to act as a prudent fiduciary of its health plan. “Whether they know it or not or like it or not,” he said, the people making these decisions are fiduciaries.
Who is a fiduciary of a company health plan?
Anyone who makes decisions about the plan is a fiduciary for those decisions. Under ERISA that covers people who exercise discretion over the plan or choose its service providers, which in most companies means the executives and HR leaders who pick the carrier, the broker and the plan design. The Department of Labor’s guide to fiduciary responsibilities under a group health plan explains the duties.
The CAA didn’t create that duty, but it gave employers specific information to act on it. Donovan focuses on three requirements. For the full duty, see the fiduciary standard.
1. Broker and consultant compensation disclosure.
Brokers and consultants who expect $1,000 or more in direct or indirect compensation from a group health plan must disclose it in writing. The disclosure lists their services and pay, and it is due reasonably in advance of the date the contract is signed, extended or renewed.
Donovan’s point is that the disclosure should come before the decision, for every option. If a broker is recommending carrier A, B or C, the employer should know how the broker would be paid by each one, directly and indirectly, because “it’s going to be different for all of them and it’s not tied to you.” In his view, the pay a carrier sets is what tends to shape a broker’s behavior. Broker compensation disclosure covers the deadlines and what to do if a disclosure is missing.
2. The gag clause attestation.
Most group health plans must attest to CMS by December 31 each year that their contracts with insurers, TPAs, networks and other service providers do not block the plan from getting or sharing its own cost, quality and claims data. The CAA bans those gag clauses.
Donovan uses the rule in negotiation. Before changing carriers, find out exactly what claims data the plan will receive, and make it part of the renewal terms. “They will push back,” he said. “You just have to keep pushing harder.” Claims data is what lets an employer see, for example, that a few large claims drove last year’s costs, or that rebates on its most costly drugs never came back to the plan. See the gag clause attestation guide for who files and how.
3. Prescription drug data reporting.
Group health plans and insurers must report prescription drug and health care spending to CMS by June 1 each year, covering the prior calendar year. The report includes the 50 brand drugs dispensed most often, the 50 most costly drugs and the 50 drugs with the largest increase in spending. Carriers, TPAs and PBMs usually file most of it.
Donovan’s advice is to look at that data, not just confirm it was filed. An employer that compares its most costly drugs against other pharmacy contracts will likely find itself looking at a different PBM. RxDC reporting explains the filing.
How does this change the way you buy a plan?
It shifts the question from “which carrier?” to “what are we paying for?” Donovan described four ways to handle a health plan’s risk, in order: avoid it, reduce it, retain it and transfer it. A traditional broker, he said, starts and ends with transfer, sending the plan to the same few carriers and picking the lowest quote. Transfer is “the most expensive option.”
With the data the CAA makes available, an employer can treat the plan like any other business unit. A builder knows what it pays for lumber and finds a new supplier when the price climbs. A health plan has the same supply chain: the administrator, the network, the pharmacy benefit manager and the stop-loss coverage. Each can be priced separately, and with claims data in hand the employer can negotiate on facts instead of trading a large proposed increase for a slightly smaller one. For how the parts fit together, see what happens behind the scenes with your health insurance.
What should you ask your broker?
Donovan offered three questions any employer can ask before the next renewal:
- What is your timeline and process? Ask for the first renewal offer 120 days before the effective date, good or bad, along with the broker’s analysis of it and where they think the plan should land.
- How are you paid? Direct and indirect compensation, for every option you’ll be shown. He estimates most companies don’t know.
- Are you a fiduciary for my health plan? “If you’re hiring them, they should be working in your best interests,” he said.
Axiom Healthcare Services formed a benefits committee that now requires compensation disclosures from every service provider. Read the Axiom case study.
How Ethos Benefits helps.
Ethos Benefits accepts fiduciary responsibility for its advice on your health plan, in writing. We help employers collect their compensation disclosures, negotiate data rights at renewal and keep a record of each decision, as part of our compliance work. To see where your plan stands, Request a Strategic Analysis.