Transcribed from the recording and lightly corrected. It may contain errors; the recording is the record.
00:00Christopher VanderWolk: We're in a time of cost crisis. I don't think there's any way around that. Last year was the worst renewal season anybody working in this industry can remember, until this year. The word fiduciary wasn't in anybody's lexicon a couple of years ago, and now it's the third word out of everybody's mouth in every meeting you go into. If you're making an excessive amount of money off a group, you're not going to want to tell them how much money you make. But my perspective has always been, if you're doing good work, you're never afraid to share what you get paid to do that.
00:30Chelsea Ryckis: One hundred percent. If you are adding value, the compensation conversation is never scary.
00:37Chelsea Ryckis: Welcome to The Business of Benefits. The Business of Benefits is your no BS, no sales guide to real solutions. No gimmicks, just the truth about how to take control, transform your benefits, and care for your most valuable asset, your people. If you're tired of the same old sales pitch and you're ready to rethink your benefits, this podcast is for you. The truth is out there. Are you ready to hear it?
01:00Chelsea Ryckis: On this week's episode, we have Christopher VanderWolk, who is one of my favorite attorneys in the benefits space, mostly because he has a sense of humor. As you'll see throughout the show today, you can definitely make jokes, and he also doesn't always give you the typical lawyer answer, which is, it depends. We did make fun of that a few times in the episode, so you will hear that on a couple of the questions, but for the most part he's specific and nuanced, and I just very much appreciate that about him. And I think you will too.
01:31Chelsea Ryckis: So today's episode, what we're talking about is how do plan sponsors filter through the noise in the face of cost crisis? Essentially, there are a lot of programs out there that seem very enticing and very exciting and innovative, but maybe, maybe not, are compliant. So that's what we talk about today. When you're evaluating these potential new solutions, how do you decide if they're compliant or not compliant? What regulatory bodies do you need to take into consideration? What questions should you be asking? And then most importantly, the number one way to know if the advice that you're getting is unconflicted.
02:10Chelsea Ryckis: I found this very interesting. I think what we probably need to do is an entire episode on just due diligence in general. We did get very specifically into SIMRPs, fixed indemnity wellness programs, wellness programs, as well as charity care arrangements. So you'll hear a lot of the nuances there and what to look for specifically with regards to those.
02:34Chelsea Ryckis: Anyway, I hope that everybody enjoys this episode. It's been one that's been on my mind for quite a while for a lot of different reasons. But as always, we welcome your feedback. Share, like, subscribe. Let us know what you want to hear more of, what's actually valuable for you, because the goal here, the goal always with Ethos, is education. So tell me what you need to know, want to know, and I will make sure that we hit on it on our next show.
02:58Chelsea Ryckis: Hey everybody, welcome to this week's episode of the Business of Benefits podcast. I'm your host, Chelsea Ryckis, and I have Christopher VanderWolk with me today. If you are on LinkedIn and you are anywhere in the ether of this side of the industry that we're on, you have probably seen his name. I have learned so much from you, Chris. Thank you so much for being here today.
03:19Christopher VanderWolk: Thank you for having me. Longtime listener, first-time caller. I'm a big fan of your body of work too.
03:25Chelsea Ryckis: I appreciate that, thank you. What I really appreciate about you on LinkedIn is that you're very fair. A lot of the time, especially with attorneys, people can take a very black and white approach. You tend to be very fair, and you account for the nuances. That was one of the reasons I wanted to have you on today, for our specific discussion about filtering through the noise and vendor due diligence, and how we can support plan sponsors in the next 45 minutes to really teach them how to understand if something is as good as it sounds.
04:02Chelsea Ryckis: Before we dive into that, let's give everybody a little background on you. Do you want to catch our listeners up to speed on what you've been doing the last few years and the type of work that you do today?
04:12Christopher VanderWolk: My career has been an evolution, like most. I ended up in benefits by accident, like most people did. I left the Army, I was an Army interrogator, and there were no jobs in New Jersey to do that. I had to find something else. So I started working at an insurance carrier, was an account manager, a sales rep, ran a TPA for a while, had that evolution that eventually led me to law school. Unlike a lot of ERISA attorneys, I started in benefits well before I went to law school. My journey was a lot of "I'm not a lawyer, but" emails, which led to me figuring out I should go to law school and see if I'm either a fraud or if I'm actually good at this.
04:52Christopher VanderWolk: I went to law school later in life, but I've been in benefits mostly on the wholesale side, working with brokers, advisors, and consultants for about 20 years now. Right now I've got a role that I'm thrilled to be in. I am the Director of Compliance and Innovation for the Greater PA market for OneDigital and Kistler Tiffany Benefits General Agency, and I serve our retail team as well as wholesale brokers throughout Pennsylvania, New Jersey, and Delaware. They look to me for compliance questions and innovation.
05:24Christopher VanderWolk: So that's the perfect setup for what we're going to talk about. Is this innovative, is it compliant? Or, you can't be too compliant because you need to innovate a little bit. Maybe the law needs to catch up. How do we balance that, and how do we resolve that tension?
05:38Chelsea Ryckis: Exactly. One quick side note. It is fascinating that you did this work before you went to law school. That is something I did not know about you. That is exactly that sort of nuanced understanding of, this is the law, but how does it actually work in real life? That's why you can bridge that gap so effectively. It makes perfect sense to me why I find you so impressive.
06:05Chelsea Ryckis: A quick question before we start diving into the noise and the chatter. Today, the things that land on your desk, do you see it more situational and reactive, like there's an urgent issue, versus prevention? Because what I'm starting to see is a lot of plan sponsors having a lot of forward foresight about future compliance coming down the road, the CAA of '26. Everyone's starting to think more long-term. What do you see in an average week?
06:36Christopher VanderWolk: It's a mix, and thankfully a lot of it is preemptive and proactive. I think a lot of that is due to people like you talking about employer responsibilities in plain language that they can understand. There's a lot of focus on how the industry works, what you need to do. The word fiduciary wasn't in anybody's lexicon a couple of years ago, and now it's the third word out of everybody's mouth in every meeting you go into.
07:00Chelsea Ryckis: Which is a whole other conversation, I feel like. How do you actually know? Anyway, continue.
07:07Christopher VanderWolk: What's reasonable and prudent? What would an expert do? So I see a lot more proactive and a lot more upfront asks. The good news is that's stuff that we share with our partners too. When they come to us and say, what could we do that would be better, well, put this language in your contracts and that'll make you better. And that's what people are going to start asking for. So a lot of proactive, a lot of filtering on, is this a real thing, is this good, what do you know about it?
07:35Christopher VanderWolk: And then a fair amount still of reactive, because the IRS letters come no matter what, and the CMS Medicare Part D and Medicare coordination letters, they come. That's reactive and has to be done. There's always going to be a mess somewhere that didn't get cleaned up. Thankfully, in my experience, they're usually in takeover situations for the people that I partner with, and they're cleaning up somebody else's mess more often than not. These people have had good partnerships, not just me, but they've had good partners that have helped them along the way to run their business the right way, make people aware of, hey, you have to file your 1095s. You can't just not do it because you don't like it. You have to do it. It will eventually catch up to you.
08:16Chelsea Ryckis: You can run, but you can't hide.
08:20Chelsea Ryckis: So let's talk a little bit about the noise, specifically within, I'd say, the self-funded arena, when we actually can take these cost containment solutions and implement them. Hopefully plan sponsors listening, you're doing that based on data-driven decision making, not for any other reason. But nonetheless, there's all this noise about, oh, this will lower your cost 20%, 30%, 40%. And we're in a time where employers and brokers are becoming very desperate for savings and for innovation. Your job title literally has innovation in it, and compliance. That blows my mind on its own.
08:59Christopher VanderWolk: How do you do that?
09:00Chelsea Ryckis: Exactly. Usually compliance is like anti-sales. I'm mostly kidding on that. But let's talk a little bit about why there is suddenly a vendor for everything, and what's the first thing a plan sponsor should think about when somebody brings them an idea.
09:19Christopher VanderWolk: We're in a time of cost crisis. I don't think there's any way around that. Last year was the worst renewal season anybody working in this industry can remember, until this year.
09:31Chelsea Ryckis: Until next year.
09:32Christopher VanderWolk: And there's no sign that it's going to get better anytime soon. So employers are like everybody else. Everybody's trying to figure out, how do I do something that's going to make a change?
09:43Christopher VanderWolk: If we think about the evolution of the industry, and I'll talk broadly, when I say the industry I mean the healthcare finance and delivery industry, so include payers, providers, consultants, everybody. When I was a kid, you had an HMO and that was it, and you didn't have a ton of options. Then we got more options and we got a big variety of different insurance plans, but everything was sort of handled for you. Now plan sponsors down to 50, 60 lives can talk about J-codes, a thing that nobody knew what those were 10 years ago even.
10:19Christopher VanderWolk: So part of this is we've gotten a lot more information. We have a ton more data that we can use. We've gotten some good movement on the regulatory side and the legislative side that's given us rights to more data, the right to do more with it. Technology's helped us to be able to identify and better underwrite risks at a smaller level. Fifteen years ago, if you wanted to go get a self-funded quote for a 50-life group, most stop-loss carriers would laugh at you. Now it's common procedure.
10:51Christopher VanderWolk: So with all that, the options have opened up and people see a ton of things. If you didn't know what a J-code was in 2005, and now you know that you can carve your J-codes out and have a special place to handle those because they're driving so much of your drug costs, that's a new innovative thing that you have the flexibility to do with the platform that you're on. And if you just think about how that could expand to all sorts of things you've never heard about, there's this big opportunity for innovative things that are compliant, and then innovative schemes that are not compliant.
11:22Christopher VanderWolk: But if you're not an expert in this because you're building something else: one of the most memorable companies I ever went into was they made bingo markers. If you're making bingo markers, how are you supposed to know what is or isn't allowed under a health plan? That's not your expertise. I don't know anything about how to build a bingo marker. I'd be a terrible person to ask for that. But if I show up in a convincing manner and I say, you can totally do this thing, I might be able to convince you.
11:46Chelsea Ryckis: And especially if your customer is desperate.
11:49Christopher VanderWolk: And who isn't these days?
11:53Chelsea Ryckis: The other note on that would be the fiduciary responsibility lies solely with the plan sponsor. So whether it's your consultant, your broker, or just the vendor themselves bringing it to you, or maybe your TPA is bringing you this idea, whoever it is, ultimately at the end of the day there are a lot in the industry that are starting to talk about fiduciary advising or co-fiduciary status. But at the end of the day, it's really going to be the plan sponsor that's responsible for the due diligence, having that knowledge of a reasonable expert, and documenting their process.
12:27Chelsea Ryckis: So I think that is sort of the perfect frame for getting into, okay, so if the responsibility is 100% on me, even if I have great partners, what does that due diligence actually look like? Can you maybe walk us through what your recommendations would be on that?
12:43Christopher VanderWolk: So you can, like you're saying, you can delegate authority, but you can't delegate responsibility. You can have people act for you, but you're still responsible for picking them and the choices they make.
12:52Christopher VanderWolk: So what does due diligence look like? I think it depends on what you're looking at.
13:00Christopher VanderWolk: For insurance, we always look at what's the paper rated at. Is this a legitimate insurance company? Are they filed with the Department of Banking and Insurance? Can I find them? Are they approved to write this in my state? If they're selling insurance, how do I know that? Insurance is a highly regulated field. If they're selling something other than insurance, it gets a lot more nebulous because it's not regulated so tightly. There's a bigger world. So you have to think about what you can get access to. Most vendors, if it's questionable at all, will have some sort of a compliance write-up. And you should read that, and you should read it closely.
13:37Chelsea Ryckis: Where do you find that? Is that something you have to ask for, or do they willingly put this on their websites?
13:44Christopher VanderWolk: In my experience, you usually have to ask for it. And when you get it, some of them will want to make you sign a nondisclosure agreement to get a compliance memo. I would say that should be one of your first red flags, because nobody has a unique ability to operate within the tax code.
14:04Christopher VanderWolk: And you should assume that the market is pretty smart. We look at the stock market and think that the future value of everything is known and baked into the price today. The market as a whole knows all this stuff. Well, the market as a whole knows how to work in the tax code, and maybe you or I don't know every provision, but the market as a whole knows what's allowed and what's not allowed. So there is no unique proprietary take on the tax code that is also legitimate, because somebody else will go do the same thing. You don't have a right to it. You can't trademark an interpretation of the tax code. It is or it is not legal.
14:40Chelsea Ryckis: I love this explanation, because I inherently have felt the same way every single time I've asked for something and been required to, or asked to, sign an NDA. It's an immediate red flag, but not necessarily having the verbiage around why this is problematic. So number one, thank you for that. That was a fantastic explanation. What about contracts? Are you asking for those before going through due diligence?
15:10Christopher VanderWolk: It depends. I'm going to put the lawyer hat on and give you the answer that every lawyer always gives. It depends. Oftentimes they don't need it. It's clear on the face if you look at the proposal or the website and you compare it to the letter they're giving you that something's missing. If you're getting closer, if it still seems like it, you definitely need to see the contract. But one of the things that I see when you get your hands on these compliance memos is they're missing key facts. The memo doesn't address the program. The memo has certain assumptions in there and will disclaim things in the program that the program is actually doing, that make the memo inapplicable to it.
15:52Christopher VanderWolk: So what that means, to put it right into the real context, is the double dip scheme. Somebody pitches every midsize CFO, gets emails every week. Somebody pitches, we take $1,200 pretax, we take a $200 fee from the employee, we take a $50 fee from you, we give your employee back $1,000 a month tax-free because they participate in our program. It's bogus. If you ever see that, just don't go any further. There is not a way to do that based on participation, flat out, bar none.
16:26Christopher VanderWolk: But you'll get a letter that will not address the key gap in there, which is there's no reimbursement. The letter will talk about how you can have pretax contributions. You definitely can. The letter will talk about how medical expenses can be reimbursed tax-free. You absolutely can do that. That's how medical plans work. That's how HRAs work. FSAs work on that. We have a lot of programs that work on that, but those programs require that you either pay a provider directly for the care that they provide, or that you reimburse an out-of-pocket expense. In these FICA double-dip schemes, there's no out-of-pocket expense.
17:01Chelsea Ryckis: There are no actual dollars. It's crazy.
17:06Chelsea Ryckis: It's so funny to me too, because in my experience these specific vendors with this program that you're talking about, they're incredibly feisty. And I think it's because they have to fight every single day. But every time I've pushed back on them or said some of the things that you've said, it's like, let me talk to your attorney. And I'm like, no, dude, I'm not spending money for my attorney to talk to you to tell you that what you're doing isn't legitimate. And I'm not giving you access to my clients.
17:36Chelsea Ryckis: Most of the time when stuff like this ends up on my desk, it's because my client met this vendor at an event and then they want me to vet it. And I take that role very seriously. I really do want to talk through the due diligence process and vendor procurement, because I think that's something that Ethos does particularly well, but I would welcome your thoughts and your feedback on it as well.
18:00Chelsea Ryckis: I find it so interesting because the bark is so loud, and I could see how that would create even more noise for employers. And if it's not necessarily the bark, it's, well, we've helped 13 million members, or we've helped thousands of employers. And then there's the assumption that large numbers must mean this is legitimate.
18:21Christopher VanderWolk: They must be smarter than you, right? These people know better than you do. I enjoy doing battle with these. If you follow me on LinkedIn, you know that I don't mind taking a stand on things. And I like doing battle with these guys because it's enjoyable for me to watch them squirm and dance. But they will tell you that other groups are doing this. They will name-drop a bunch of highly reputable firms. They will tell you they've got all these letters. They'll never share any of them with you. They don't exist.
18:52Christopher VanderWolk: And side note, why are they always in the car and always traveling? They're never at their desk. Every time you get on the phone with them, they are in the car.
19:02Chelsea Ryckis: That's actually true. Why is that a thing?
19:05Christopher VanderWolk: I don't know, but they're always in the car and it's always, sorry, I'm late in getting back to you, I was traveling last week. They're making a ton of money off this stuff. They're taking $250 per employee per month. I don't know a broker who makes that off of any client. Nobody gets that.
19:23Chelsea Ryckis: No, that's insane.
19:24Christopher VanderWolk: Not even 10% of that is getting closer to what most people are making on a per employee per month basis.
19:30Christopher VanderWolk: So these letters come in. How do we vet them? On overall vendor due diligence, approach everything, in my perspective, with a healthy amount of skepticism, but also a healthy amount of optimism. There are legitimate plans out there. You can have a wellness plan. You can have a fixed indemnity benefit plan. You can have an HRA. There are all sorts of things you can do. You can have innovative point solutions that save you on cost while delivering a better experience to your members. But you've got to also think, where is this coming from? Why is one person doing this who maybe doesn't have the expertise in this compared to everybody else? How did you end up in this world, and what are you coming from? What's the letter say? Who wrote the letter?
20:15Chelsea Ryckis: I've also noticed the websites never clearly say what the program is, and it is incredibly frustrating to me. I'll get these sent to me all the time and I'm like, what is this? What are they doing? Do you think the confusion is intentional?
20:29Christopher VanderWolk: I believe it is. I think it's designed to do that, and also to try to give them some sort of pivot out. To quote the famous line from The Wire, are you taking notes on a criminal conspiracy? You don't want to do that. So yes, I think it's intentionally designed to confuse people. There are a lot of references to the code, which makes it look legitimate. And they try to look polished, and the websites look better now than they ever did. Thank you, Claude. Claude's great, but also dangerous.
21:01Christopher VanderWolk: Gloss is cheap now. You can build something that looks really polished in a couple of hours, and it can be very compelling. And you can pressure test it with Claude to say, how do I make this more compelling? I get responses back from these vendors that are clearly written by Claude. I'm a big AI user. You still own what you write. You need to own what you write.
21:25Chelsea Ryckis: It needs to be your product. AI was designed to make us smarter, not stupider. Whatever you're putting out is you. I have this conversation literally weekly with my team.
21:36Chelsea Ryckis: So what are the regulatory bodies that employers should be thinking about? If they're reading these notices, obviously tax code is one. But is this an ERISA plan or not? What are the other factors that plan sponsors should be thinking about? Because unless they are working with somebody that knows what to look for, how would they possibly know what regulatory body should be mentioned in these notices?
21:59Christopher VanderWolk: It's really hard. If you don't do this every day, how would you know all this? So I find that the illegitimate ones are really heavily into the tax code, because that's how they hide the money. We don't pay taxes on it, that's where the benefit comes from. So the tax code is a big base of the illegitimate programs. You can have legitimate tax-free benefits. I ran a TPA for nine years. We did HRA, FSA, HSA, Section 125. Those are all legitimate tax-saving benefits.
22:32Christopher VanderWolk: But that's a big part. If an employer is offering a plan that extends medical benefits in any way to their employees and their employee dependents or former employees, that's an ERISA benefit if you're a private sector employer. And all these programs have some level of telemedicine, free generic drugs, some sort of wellness or wellbeing component. Those are medical benefits. And if they're offered by a private sector employer to employees, that implicates ERISA. So now you've got, are you being a prudent fiduciary? Are you being a prudent plan sponsor?
23:06Christopher VanderWolk: And I know one part of the code I can drop to you that is near and dear to your heart, 408. Is your compensation disclosed and is it reasonable? So if we know these promoters on the double dips are taking $50 per employee per month from the employer and $200 per employee per month, is that reasonable? Well, the bundle of services, that telemedicine package, you can buy that, and I've priced it out. It's $8 per employee per month.
23:37Chelsea Ryckis: I would say it's $5 to $10 if I had to guess.
23:41Christopher VanderWolk: So if you're paying $200 for that, is that reasonable? And what else are they doing for that money? They're just telling you to go and evade taxes. So that's not a reasonable fee. And then with some of the other ones, you potentially bring in HIPAA discrimination violations, Americans with Disabilities Act violations. You get into Public Health Service Act violations. Depending on what the program you're looking at is, you could be bringing yourself a host of problems that are enforced by the IRS, the DOL, and the DOJ.
24:13Chelsea Ryckis: Yikes. And I think that's where a lot of plan sponsors, and I would even say consultants, don't necessarily put all of those pieces together, because they're so fixated on the final cost savings. Last note, especially on the fixed indemnity, the double dipping on the wellness piece. Have you ever been involved in the implementation of one of these? I hope not.
24:41Christopher VanderWolk: Thankfully, no. I haven't.
24:44Chelsea Ryckis: I've been on the side where we came in, this was already in place, had to have the conversation around this is probably not something you want to continue, here's why. The unraveling of it, absolutely a nightmare. But even worse, what I was told was the implementation, just how actually complex this is from a payroll perspective.
25:06Chelsea Ryckis: So I think there's a couple of things to look at, especially because the plan sponsors I've talked to that have been fooled into doing something like this, it's been posed as incredibly easy. Super, super easy, no big deal. It's fast, you can do it whenever, it's efficient, blah, blah, blah. And then you do it and it's the opposite. So it's sort of like that too good to be true mentality. Any last thoughts on that one?
25:32Christopher VanderWolk: The unwinding is potentially really painful for people. The first one of these that ever landed on my desk was about 10, 11, 12 years ago. And it was, unfortunately, the only promoters that I've seen go to prison. There should be a lot more people getting perp walked for this stuff. But [name removed] out of [location removed] started a company called [name removed], and it was called [name removed]. I had a broker come to me that was asking me to look at this because they were talking to a significant city in New Jersey about putting it into there. I told her, you're going to end up in jail if you do this. Don't do this.
26:12Chelsea Ryckis: Did they listen to you?
26:14Christopher VanderWolk: She did, yes. Thankfully. So she's not in jail, which is great. But this program, you said too good to be true. The way they explained it then was the $1,000 came from a loan that you would never have to pay back. And so my first question was, who is going to issue a loan you never have to pay back? And can I get some of those? If you're just going to give out free money, just give me some. I'll take free money. I like money.
26:43Chelsea Ryckis: Yes.
26:44Christopher VanderWolk: Let me see this. I'll look at it. But those folks, the promoters there, [name removed], went to federal prison. And the DOJ, you can go search for [name removed], [name removed], last name [name removed]. You can go find all the press releases on this. And the DOJ was very clear that employers and individual taxpayers bear responsibility for unpaid taxes, because that's what this is. You're underreporting income.
27:14Christopher VanderWolk: And if you think about what is likely to happen, the companies that these promoters target, and the IRS calls these promoted abusive tax shelters, these promoters target franchise employees. So you'll see big brand logos on their promotions, because they're working with a franchise of that big brand. They didn't get vetted by the brand.
27:40Christopher VanderWolk: Big Fast Food Burger Incorporated. They got a small franchise to do it. And so who works at these places? It's people making $15, $20 an hour that are going to spend every dollar that comes into their paycheck. So if they're under-withholding for a year or two years and they get hit with a back tax bill, where's that money coming from? And what are you doing to them? What happens to them when they go to collect Social Security and they've under-withheld compared to what they've earned? What happens to them along the way? It's not a victimless crime to not pay these taxes.
28:14Chelsea Ryckis: One last final thought on wellness programs. Can you clearly define a line for employers on when it comes to wellness programs versus tax scheme in a wellness costume? Where does that lie?
28:28Christopher VanderWolk: I think just as a rule of thumb, there's no free lunch. So if you look at implementing a wellness program, you're going to have opportunity for real return on your investment, but you're also going to have the real possibility that it doesn't do anything and it costs you money. If it's guaranteed to deliver a positive ROI and there's no downside, you should start asking questions. And it might be, you don't know until you dig into it.
28:58Christopher VanderWolk: But a wellness program, if you implement a step challenge for your workforce, is that guaranteed to put more money into your workforce? Probably not. It might increase morale. It might show a real benefit in ongoing long-term health. But I think, Chelsea, with the way you do your work, you know better than anything, the problem in health costs isn't are employees walking enough. The problem is those two employees on specialty drugs driving 40% of the cost for the group. How do we buy those drugs better? Not how do we get Chris to go walk a little bit more. I'm not on a specialty drug. Where are we going to get this? Where's the return coming from?
29:35Chelsea Ryckis: One hundred percent. I have this conversation especially with prospective clients who issue an RFP, and then you can see this entire section dedicated to wellness, and they want to see some elaborate program. And every single time I'm like, you did not provide enough data for me to be able to intelligently tell you if a program would make any sense for you. I can put a bunch of shit on a page and make you feel good, but I'm not going to do that because it's not accurate.
30:02Chelsea Ryckis: And then also, when it comes to wellness, and I always get haters hating on me for this, it's really hard to quantify the ROI. Really, really, really hard. What you can quantify is return on engagement and those sort of other things you're talking about. There's actually one wellness expert out in the field that I'm really impressed with. It's Dr. Romie Mushtaq. She was on our webinar, or we did a webinar with her, but her whole focus is on burnout and exhaustion. It's not necessarily steps and things like that.
30:37Chelsea Ryckis: But anyway, guys, don't expect return on investment all the time with wellness. And to Chris's point, if you are being promised that, you really need to dive in deep. Let's get into charity care arrangements. Can you set the stage for plan sponsors on when they may hear this, or help them thread the line of what this actually is?
31:02Christopher VanderWolk: This goes back to people are desperate right now. Everything is expensive, everything's unaffordable. We look at chronic conditions and the cost of specialty drugs, what it does to health plans, what that does in turn to the economics at a company, what it does for people's pay raises. A 3% merit increase disappears with a 60% medical increase. The employees feel a negative take-home after a 3% raise if their contributions eat it all up. So employers, employees, everybody is looking for a solution, and so opportunities come along.
31:39Christopher VanderWolk: Charity care is potentially a real thing. How does charity care work? In your state, depending on where you live, you may have what's called a 501 requirement. That's an IRS regulation that applies to nonprofit hospitals. They have to do some sort of charity care to maintain their nonprofit exemption. It varies by state, it varies by hospital. It depends, to put the lawyer answer on it. But that's real charity care. And what that means is if you do some good navigation, you can help people find ways to offset some of their costs. And that's legitimate.
32:12Christopher VanderWolk: There are also charities that are set up to help people in certain communities. Hemophiliacs, for example, or non-Hodgkin's lymphoma. There are a lot of people that fundraise for specific conditions to help people out. The American Cancer Society, for example, has a program to get people to and from their chemo treatments, to give them a ride. Those things are real and they're valuable and they make a huge impact for people, because a lot of people that are struggling with these chronic conditions don't have somebody available who can bring them back and forth to the doctor during the day. Even if you've got a family at home, they have jobs too.
32:50Christopher VanderWolk: So there are real avenues for charity care and they are valuable and legitimate, and I think that, like a lot of things, the real stuff gives opportunity for maybe some less than legitimate stuff.
33:05Christopher VanderWolk: So for a charity to be legitimate, the IRS looks at a thing called donative intent. Did you give to the charity without any expectation of return? So I give my time. I do pro bono legal work. I give money back to the law school that I went to for the moot court team that I was on that I got a lot out of. I don't get anything back for that other than I feel good about it. I do get that, but that's not a financial return. It's not anything concrete.
33:34Christopher VanderWolk: If you go and you donate to a charity and you have a golf outing with them, what you do is you buy your golf outing. If you look at the fine print, if they're doing it right, the value of the round of golf is not tax deductible, because you bought a round of golf. You paid more for it and that extra amount is your donation. But that's how that works, because if I give you money and I expect to get something back, that's not a donation, it's a purchase.
33:59Chelsea Ryckis: Right. It's an exchange.
34:02Christopher VanderWolk: So when we look at a charity, is the money given freely is a big part of it. And then the other end of that is, on the charity side, is it received without any sort of control? Does the charity have the ability to make their own decisions, or does that money come with specific strings? Now, you can earmark donations for certain things. You can say, I love this hospital, I'm going to give this hospital $1 million to build a new wing with my name on it. You can say, I want to put this money towards kids going through chemotherapy, but ultimately the charity gets to pick which kids. You don't get to say, I wanted it to go to that kid. You give it to the charity and you let them use their discretion.
34:45Christopher VanderWolk: Where it gets far more questionable is when essentially the charity is acting as a conduit, and that's the IRS language for it, where I make a donation and I control what the charity does with it, either directly or indirectly. If my donation only happens because a certain person gets a certain thing, that's not a charity. That's a conduit. It's a third-party administrator for other purposes.
35:15Chelsea Ryckis: For removing claims.
35:18Christopher VanderWolk: Yeah, so we've got an environment now where people are desperate and they want to find options. If you have an employer group, there are two avenues to pay for individual coverage. For small employers, you can do a QSEHRA, and for all employers, you can do now Choice, formerly known as ICHRA. Those are the only two models you can pay for individual coverage for people on the individual marketplace, and both of those require that the same class of people not be offered a group plan. With the QSEHRA, you can't have a group plan at all. With ICHRA, you have broad classes. You can't just say, I'm going to carve Chelsea out. Chelsea can't be a class unless Chelsea's the only person who lives in the state. Those are the only ways you can pay for individual programs. And if you pay for it otherwise, you've got an unlawful employer payment program. All of these bring with them different penalties.
36:09Christopher VanderWolk: And then there's also the human cost for people when you do this to them. So if we're targeting people that are high-dollar claimants and moving them away from the group plan, some of the things we know to be true about the comparison between a group plan and an individual plan is the networks are narrower on individual plans. And what does that mean for somebody with a chronic condition and their disruption of their care team? Is their full care team still in that other plan? It may or may not be, but that's a real consideration. How are their drugs covered? Who knows? Does the formulary change from one to another? It's hard to know that.
36:44Christopher VanderWolk: And then there's also a real loss of rights they give up when they go off of the group plan. So it's positioned as an election that they make. When you choose to drop your employer plan, you're giving up your right to COBRA. So let's think about high-cost claimants. They're going through something. It's probably the hardest thing they've gone through in their life. We hope that they recover and they make it back, but very frequently they end up stopping their work and they need help and they're engaged in medical full-time. Like they say, if you have good health, you have a lot of problems. If you have bad health, you have one problem.
37:21Christopher VanderWolk: These people have one problem and they need to go work on that. But then what happens? The employer can say, I don't want to cover this anymore. They've been gone. I'm terminating them. They're not returning to work. They lost their COBRA rights because they're not on a group plan sponsored by the employer anymore. They're on an individual plan that's funded through some other conduit. And so we've got real risk to people here depending on what happens.
37:50Chelsea Ryckis: My thought on the COBRA piece was just, if you're in this charity care arrangement where the money is coming from the employer essentially through a conduit, compliant or not compliant, and mostly not compliant, when that person's no longer employed, there's no incentive for that sponsorship to continue. And that's really the sad part, I think.
38:19Christopher VanderWolk: And so to talk about the conduit and go back to what we talked about, a 408 reasonable fee basis for a fiduciary. If an employer wants to look at something and figure out if this is reasonable, or maybe sniff it out, let's look at what the fee is and what the fee is buying.
38:37Christopher VanderWolk: There are programs out there that are legitimate that work on finding people programs that help them. They find charity care, they see if they're qualified for Medicaid or qualified for Medicare, they find them different programs at their local hospitals through 501 or 340B. They look to the whole universe out there to find them other options that could help them. And those programs are really affordable. They usually charge a per employee per month fee. Maybe they charge a percentage of the savings depending on what they actually do. But when you look at them, there are no guarantees. The fees are pretty reasonable.
39:17Christopher VanderWolk: They can explain to you what they do. They take a pretty strong, here's what we can do, here's what we definitely can't do posture. And that's a valid thing to do. You can't incentivize people off of your plan for Medicare if you're over 20 employees, but you can educate them off, and Medicare might be better for you than your employer's plan, depending on your situation.
39:36Chelsea Ryckis: A lot of the times, yeah.
39:38Christopher VanderWolk: So there are real ways to do this. Look at what those fees are. When you look at some of these conduits, it's pretty easy to identify the conduit. What services are you buying? If you take the program at face value, what services are you buying? You're buying somebody to counsel an individual on the appropriate individual market plan. We know that that pays about $20 per contract per month, because that's what individual commissions are. So we've got a basis there. $240 a year is what you get paid to write individual insurance per person, give or take, depending on your market.
40:14Christopher VanderWolk: We know that if they include a claims repayment tool, a debit card, we know that TPAs, and I ran one for nine years, charge somewhere between $2.50 and $25 a month to do that. Your price may vary, but that's in the range there. So call it $30 to $300. So we're at $500 on the high end here so far.
40:41Christopher VanderWolk: And then we're looking at charity navigation. I'm going to go out and I'm going to find charities or programs that will help you. And that navigation, we know because there are other people in the space that do it, call it $20 to $40 per employee per month, in the range. So on the high end, we're at $1,000 a year for an employee to get individual insurance, TPA administration, not the claims but TPA administration, and charity navigation. The fee for the conduit program is about $50,000.
41:17Chelsea Ryckis: I definitely want to hit home what you said earlier, which is there are legitimate versions of this and we use them in our programs every single day. So if you're listening to this, plan sponsors, and you're curious on what some of those may be, reach out to me, reach out to Chris. The other thing I wanted to ask you about was, I also have seen a lot of for-profit hospitals have some type of program like this as well on their websites. Have you seen that too? And is that legitimate?
41:47Christopher VanderWolk: For-profit hospitals, are you talking about premium payments?
41:51Chelsea Ryckis: Yeah, like assistance in general.
41:54Christopher VanderWolk: If you think about the mechanics behind that, it's going to vary based on state law. Hospitals love having people with insurance. And so this has been trodden. Proceed with caution and reach out first. But I would say as a general rule, a good practice would be to look for all avenues. There's a lot of great stuff out there and a lot of it's underutilized, a lot of legitimate benefit offerings. And that makes it all more confusing for people, because it sounds really similar. We're talking about charity care and conduits, and it's confusing stuff for people.
42:35Christopher VanderWolk: But I think for employers, you need to have good partners who know what they're talking about. You need to have somebody who's telling you what they make money on, what they don't make money on, and how, and trusting the people that don't have any skin in the game. I'm not going to make any money if you sell this or not. Here's why I'm telling you it's illegal. If you do it, I don't make any money. If you don't do it, I still don't make any money. I'm just telling you this stuff.
43:01Chelsea Ryckis: So that is the entire positioning of our business at Ethos. And sometimes I really feel for plan sponsors, because again, we're talking about noise today. There's so much noise out there and everybody knows better than the next person and everybody can serve everybody. And I saw one of your posts recently, I think you actually commented on my post.
43:23Christopher VanderWolk: Yeah, last night.
43:25Chelsea Ryckis: It was something along the lines of, nobody's an expert in all things. We're not a fit for every single plan sponsor out there or every single benefits program. And anybody that claims that they are, number one, is a red flag. And the same is true with these vendors and these programs. But I do feel deeply for plan sponsors, because how do you cut through all of it?
43:49Chelsea Ryckis: And for me, and I'm interested to hear what your idea is on this, I think it's exactly what you just said. It just comes down to incentive. Is this person incentivized to give me this program? Are they getting a percentage of savings? Should they be getting a percentage of savings? Probably not. And that's where that whole flat fee model comes in, and that alignment in advice.
44:10Chelsea Ryckis: The other thing that you said was, well, it's pretty much the same thing, the fee reasonableness. So not only is there a fee attached to it and how are you getting paid, is it reasonable? What other considerations should plan sponsors have, or questions should they ask, when they're looking at potential solutions?
44:26Christopher VanderWolk: On digging into the incentives, it's not another question, but it's just to expand on it too. I think you should have people that you can go to that are not invested in your decision either way, that you can trust. And maybe that's your consultant, maybe that's your attorney, maybe that's your accountant. You should have somebody that you can go to that doesn't make a profit or a loss on the sale of a given idea.
44:55Christopher VanderWolk: You should also look to what else is out there. The mainstream isn't always right, but the mainstream is generally right in some things. So look to industry leaders for good signals. It's not always right, but for anything tax-related, are the Big 4 doing this? If they're not, why not? Maybe they haven't caught on, but the Big 4 have more smart people who've spent more time analyzing every loophole in the tax code than any broker I've ever known. And certainly more than somebody who was selling mortgages and employee retention tax credits three years ago.
45:34Christopher VanderWolk: So think about where this is coming from, and why it's way outside of the norm, and why isn't the norm there. And then you might be a leader in the field and doing something new. Like the people that started self-funding plans 15 years ago were way outside of the norm, and that's cool, but everybody else caught up.
45:54Chelsea Ryckis: Legit.
45:55Christopher VanderWolk: And people caught up too. You're not the only person talking about self-funding. If you think you are in your market, you need to update your talk track, because everybody else is catching up. The mainstream catches up pretty quick, and you could be a leader, but there's a lot of fast followers. And I think that complicates it too on the double dip, because there are so many of them.
46:16Chelsea Ryckis: Which brings me back to how we started this conversation, with the term fiduciary, and it being sort of the new transparency, or the new wellness, or insert buzzword of the decade. When it comes to fiduciary compliance and due diligence and procurement and all of that, what's your take on vendors wanting to be co-fiduciary or adding fiduciary?
46:46Chelsea Ryckis: Because you've probably heard the episode if you listen to the show. I've had dozens of vendors reach out over the last few years, especially when we were starting on the speaking track about five years ago on this fiduciary talk path. And it was, well, how can we incorporate this into our marketing, or how can we get more sales? And it just pisses me off, because that's not the point, people. But how are you seeing that, number one? And then number two, how do we avoid it?
47:10Christopher VanderWolk: I am. I'm seeing prospects and clients ask for it in their RFPs too. So the word is getting out to people outside of our industry. And my position on it is, if we look at who a fiduciary is under ERISA, it's somebody who exercises discretion on behalf of the plan.
47:32Chelsea Ryckis: Over plan assets.
47:34Christopher VanderWolk: Plan assets or decisions. They all relate back to assets, but eligibility, whether the claim's going to be paid. My perspective is that we as consultants have a duty to be clear and transparent and tell our clients what we earn, how we earn it, and what they do or won't do that will cause us to make more or less money, so we can explain our incentives.
48:00Christopher VanderWolk: I also believe that consultants don't belong on the fiduciary committee, because we have way outsized of a voice. There are a lot of meetings that I'm in where I make sure that I'm the last person to speak so that I don't influence anybody else's say. I think the job of the consultant is to give the absolute best advice they can to the fiduciary committee, and the fiduciary committee should make that decision. This is different than the retirement side. On the retirement side, we're touching money and we're picking investments for people. Those are discretionary actions.
48:32Chelsea Ryckis: Exactly.
48:33Christopher VanderWolk: On the benefits side, very rarely do brokers actually exercise any discretion. They make recommendations. Those recommendations carry a lot of weight. But ultimately, they're making recommendations. So my perspective is we should not rush to sign on as co-fiduciaries, because I don't want to tip the balance on the committee. Because when we get into a committee, if I'm on a benefits committee with an employer, I will clearly be the most qualified person on that committee. And so they're going to do whatever I say. And if I'm also the consultant, then how arm's length am I being here? Am I just self-dealing?
49:09Christopher VanderWolk: As a consultant, I made this recommendation. As a fiduciary, I think it's a great idea. I don't like that idea. So I like to sit outside, be clear, be transparent. Tell them, the fiduciary standard is the highest standard of care in the law. I will act in your best interests, but here are my interests. You need to know, by the way, that I do this job for profit. I do this so that I can earn a living, and this is how I make a living off of working with you, and this is what you pay me to do this.
49:37Christopher VanderWolk: Now, that's going to be hard for some people. If you're making an excessive amount of money off a group, you're not going to want to tell them how much money you make. But my perspective has always been, if you are doing good work, you're never afraid to share what you get paid to do that.
49:52Chelsea Ryckis: Exactly, one hundred percent. If you are adding value, the compensation conversation is never scary.
50:01Chelsea Ryckis: And it shouldn't be. I couldn't agree more. It's funny, when I have people on our account management team start and they're from other agencies, there are like three or four times in the client experience over an annual basis where a compensation conversation is had. So it's disclosed with all the renewal options, and then it's disclosed again once the renewal option is picked, and then it's disclosed again after open enrollment on our success call, and then it's disclosed again on fiduciary committee meetings, and it's updated according to enrollment. And if anything else changes, obviously.
50:31Chelsea Ryckis: But they're just like, well, how many times do we have to do this? And I'm like, it's so important as well to be associated to a scope of work. Because sometimes your fees might be higher, but you've added all the compliance. Maybe you're doing actual care navigation, like some of the programs that you spoke about that are legitimate. Maybe you're doing these things. So it's always associated with a scope of work. And I think the more transparency around that communication. We've never asked for a raise in our fee and never been given it, because we know how to add value and we know what's priced, what's fair.
51:13Christopher VanderWolk: You start with a proposal that says what your fee is. You tie that to your scope of work. You do the work, you finish up with a stewardship report at the end of the year to say, this is all the work we did for you. And by the way, your fee bought you all that stuff that we did. These are our results. These are the SLAs we hit that you asked us to hit that we did. These are all the people on your team that we brought in to cover these things for you. And this is what you bought for that. And if you think you can hire somebody for less that'll do a better job, well, maybe, but this is what we did and this is what it costs and this is what we're proud of doing for you.
51:49Christopher VanderWolk: And I think that's a position of power to be in, because you can say, for my teams, and I hate to say it, I sound too arrogant when I say this, but my teams get to bring an ERISA attorney in with them.
52:00Chelsea Ryckis: Yes, badass.
52:00Christopher VanderWolk: And I'm on their team. That's a part of the fee basis, is you bring an attorney on the team. And I can't give them legal advice, but I can give them great guidance. So that's the stuff that, when you're proud of what you do, it flows naturally.
52:14Chelsea Ryckis: Exactly. You're not afraid of it. There's no posturing and positioning. I just did a 90-day review with a new employee. And she was like, I think the most interesting thing has been that there's no posturing with clients. She's like, I used to be rewarded for bringing clients problems or finding compliance issues, and basically blowing up whatever the previous person had done, making them feel like they're in a really shitty position. And then being like, and here's advice on how to get through it. And I was literally like, that is the antithesis of the way that we want to do business.
52:48Chelsea Ryckis: It's wild. There's the difference in positioning. And I think that's another good message for plan sponsors, whether it's vendor selection or procurement or a new point solution or a relationship with really anybody. If you're being made to feel constantly, and I've heard this one a lot this year, belittled for your ideas. We have a client that asked their consultant for four years to do a PBM RFP. And every single time it was like, that's cute, that's adorable.
53:13Chelsea Ryckis: If you're being belittled, if the compensation conversation is one that's strenuous and stressful, or I've seen it also where every time they ask for something additional, it's an entire new fee, and it's not aligned in any way. Those are pretty good red flags as well, I think. In relationships, if you don't feel confident to even ask questions, what's the point of having a consultant?
53:39Christopher VanderWolk: And for the employers that are listening to this, rest a lot easier than some of those people selling you fear will do. In my experience, if you're trying to do a good job, you're probably doing a pretty good job. You need to be diligent, and diligent is just another word for careful. You need to think about what you're doing, be thoughtful.
54:03Chelsea Ryckis: Have a process.
54:04Christopher VanderWolk: Yeah, have a process, write down your decisions, and you're most of the way there. And in my experience, when a government agency does show up, because that's the real big risk most of the time, they tend to be really reasonable if you are a reasonable person trying to do the right thing. That's not a guarantee, but almost every case I've seen, good people trying to do the right thing get some grace. And the FBI doesn't show up on your door if you check the wrong box on accident one time.
54:34Chelsea Ryckis: Right.
54:35Christopher VanderWolk: You've got some space and some grace to fix these things, even when you get a scary letter. IRS letters are scary. It's, here, you owe $300,000. That's a terrifying letter to get, but they often get wound up pretty easily. So it's just like, take a breath. If you're trying to do the right thing, you probably are. If you're not trying to do the right thing, like I mentioned in your post, Chelsea, I'm not the person to work with you. That's not going to be my client. But if you're trying to do the right thing, you'll typically get there.
55:03Chelsea Ryckis: It's funny, on discovery calls I'll always kind of lead with, the point of today is to see if there's values alignment. And that's literally what I'm looking for. Are you trying to do the right thing and do right by your people? Because if it's 100% every year a cost conversation, or we're looking for these loophole programs, then no, not the person for you.
55:29Christopher VanderWolk: Yeah, you go work with somebody else.
55:31Chelsea Ryckis: There are a lot of options out there. So let's wrap up today's discussion. Do you have any other words of wisdom for our listeners? Any stories you want to share? Just anything that you want to put out into the world?
55:45Christopher VanderWolk: I am happy to be a resource for people if you need anything. If you get one of these schemes in, if you shoot me a message on LinkedIn, it'll probably take me about 20 seconds to look at it and give you my first read on it. And I'm happy to do that.
55:59Christopher VanderWolk: The big thing, I think, is stay a student of this industry. It's going to keep changing. Pace is increasing and the change is coming really fast. There's a lot of really great stuff happening and we're about to see a whole lot more. There's some really good stuff coming. Change is never fast enough, but also too fast. So we're seeing a lot of good stuff come. You need good advice. You need people you can trust.
56:29Christopher VanderWolk: And in my experience, the people who are willing to help you are numerous. You don't need to be my client for me to be helpful to you. You'll go help somebody else, and that's enough for me. And I think there's a lot of those people out there. You can figure out who they are pretty easily. Most people are pretty accessible and want to help good people do the right thing.
56:51Chelsea Ryckis: I agree. Where can our listeners get in touch with you?
56:55Christopher VanderWolk: Find me on LinkedIn. Chris VanderWolk, or Christopher VanderWolk, I think it is, is what it says there. But I take a lot of opinions and I post them. So they're mine only. They don't represent any other organization.
57:08Chelsea Ryckis: And I can tell they're not AI-generated, which I greatly appreciate too. So thank you for that.
57:15Christopher VanderWolk: Appreciate that.
57:15Chelsea Ryckis: Thank you so much for being on the show today, sharing your expertise. I definitely think that we should keep the communication channels open, maybe do a webinar in the future on something specific. I know I was sort of baiting around the idea of tobacco surcharges, which I've been getting a lot of questions about on LinkedIn. So maybe you and I could do a live one day, or another conversation around that. But as always, thank you for your knowledge, thank you for your passion, and thank you for being willing to give it back to people, because that's the only way that we make the change we want to make.
57:43Christopher VanderWolk: I'd love to keep the conversation going. Thank you so much for having me. I'm a big fan of the show and the way you do your work. So really glad to have been able to join you today. Thank you.
57:51Chelsea Ryckis: Thanks, Chris.
