On December 27, 2020, the U.S. Congress passed the Consolidated Appropriations Act of 2021 (CAA) which introduced new disclosure requirements for health plan sponsors. The goal was to provide greater transparency in employee health plans, promote increased competition, and help drive down costs. Failure to comply can lead to costly lawsuits. It is important that heath plan sponsors and fiduciaries understand their specific responsibilities and where many are falling short.
Responsibilities under CAA
Health plan fiduciaries are responsible for monitoring fees and costs. Health plan sponsors may be unaware that certain activities constitute their becoming fiduciaries. Specifically, these activities include:
- Selecting and monitoring third party administrators (TPAs), networks, consultants, and other vendors;
- Ensuring fees paid to plans are reasonable;
- Appointing and monitoring other fiduciaries;
- Interpreting plan provisions; and
- Exercising discretion in denying and approving benefit claims.
All health plan fiduciaries must also comply with the Employee Retirement Income Security Act of 1974 (ERISA) and act solely in the best interests of a health plan’s participants and beneficiaries. This encompasses their responsibility to provide benefits and cover reasonable expenses. Further, their actions must be in accordance with the plan documents and adhere to a sound process in the performance of their responsibilities in meeting requirements. This includes disclosures for all covered health plan-related service providers, negotiated rates for heath provider services, as well as reporting of health care and prescription drug costs.
Demonstrating Fiduciary Responsibility
While these requirements are fairly straightforward, there have been many complaints stemming from non-compliance. To demonstrate a commitment toward full compliance with health plan disclosure requirements under CAA and a thorough process, it is recommended that the plan fiduciary take the following actions:
- Evaluate governance compliance framework, inclusive of reviewing plan documents to assure that plan-related fiduciary/governance activities are consistent with the plan; identify the roles and responsibilities of other plan service providers (i.e., Board Members, TPAs, consultants); and determine if improvements are needed.
- Revise fiduciary/governance procedures to best align with the plan documents and new disclosure requirements, as well as to minimize potential risks and associated liabilities.
- Consider whether the organization would benefit from establishing a health plan disclosure committee, whose members include fiduciaries, and who are charged with regular monitoring of heath plan disclosure activities and providing written reports to company officers and Board Members.
