The U.S. health care landscape is riddled with endless schemes that place profits ahead of patients. That’s why Congress has enacted a series of laws through the years designed to protect health care consumers from unscrupulous practices. They include the Employee Retirement Security Income Act (ERISA), which was enacted 50 years ago, to the Consolidated Appropriations Act of 2021 (CAA).
Compliance with these and other key pieces of legislation is imperative for employers whose health insurance plans cover the lion’s share of working Americans. Now more than ever, the sponsors of employee benefit plans are expected to raise their level of stewardship and fiduciary responsibilities as pressure mounts for the health care marketplace to provide price transparency and end surprise billing.
One of the foot soldiers in this never-ending battle is Julie Selesnick, senior counsel at Burger Montague and a member of the firm’s Employee Benefits & ERISA practice group. Her focus is split between helping health plan sponsors be better fiduciaries and litigation that usually targets health insurance carriers and third-party administrators (TPAs) that stonewall access to plan information. The following interview was edited for space and clarity.
Let’s talk about fiduciaries and the work that you do as a consultant for plan sponsors. What are their obligations, including any new ones?
SELESNICK: ERISA imposes a fiduciary duty on people administering employee benefit plans. This is not new, although some of the tools that fiduciaries in health plans now have are newer. Prudence and loyalty are the two main duties under ERISA, and under prudence, it says you have a duty to administer the plan as someone with knowledge in this area would do. That means you have to rely on outside vendors for much of it.
Part of being a responsible plan fiduciary is hiring vendors that are appropriate for your needs and monitoring them. And that is where the CAA comes in. It provides tools to access enough plan data that allows you to see whether claims are ERISA-compliant, being paid properly, and there aren’t any conflicts of interest such as realizing your broker was being compensated from indirect resources.
What is the CAA and why is compliance so important for health plan sponsors?
SELESNICK: It’s just the spending bill that Congress passes every year, though in 2021 they had all these important provisions related to transparency and health benefit plans. Of the four provisions, the focus is on Section 201, which is removal of gag clauses in contracts with TPAs and pharmacy benefit managers [PBMs]. Gag clauses prevent a plan from accessing data, and figuring out costs and quality information on what they’re spending. They now have to be removed because they were impeding plans from accessing this data and being able to use it.
The second rule is compensation disclosure, Section 202, which stipulates that if your plan has a service provider that’s going to earn over $1,000 in a plan year, then they have to disclose all of their direct or indirect compensation. And you have to receive this disclosure either before entering into a new contract, or renewing or extending an existing one.
The third section has to do with mental health parity reporting, and making sure you don’t have any quantitative limits on the mental health and substance use disorder side of your coverage that are not the same as they are on the medical and surgical side. There are a lot of parity issues in health plans that are only recently being uncovered, and especially the non-quantitative treatment limitations. Those have been more difficult to suss out, and so one of the provisions is to theoretically give plans access to the type of data they need to make sure that the plan is not discriminating on the mental health/substance use disorder side.
The fourth one is prescription drug data collection and reporting. You collect information about rebates, premiums, your top-50 drug spend and what’s growing. That information is submitted to CMS [the Centers for Medicare & Medicaid Services], and it’s supposed to be reported annually to Congress, although there hasn’t been a report yet. But plans are also supposed to use this information. It fleshes out the claims data and compensation information to make sure you understand the rebates that aren’t passing through to your plan and the cost of certain prescription drugs.
All of this is geared toward giving plan fiduciaries the type of access to data they need to make better fiduciary decisions, see problems in the data that could allow them to make better decisions and stem some of the fraud, waste and abuse – money that doesn’t need to be leaking out of a health plan to vendors that previously has been unseeable.
What is the difference in a year’s time in terms of awareness and understanding of the law?
SELESNICK: This is the third training we’ve done. Each time there are more responsible plan fiduciaries in the room, and the first time, people just didn’t even understand that they could negotiate with an insurance carrier, or request changes in their agreements. They also weren’t sure what their obligations were regarding filing attestations [that certify the validity of plan documents]. Now we’re seeing a lot more savvy plan fiduciaries asking questions. The number of attendees is growing, and what is great to see is a good number of employers realizing that if you lean in and embrace the rules to be a better fiduciary, you can run a much better plan and save money for your company and plan participants, which should be the ultimate goal.
How are employers looking at their benefits a bit differently under the CAA and saving money?
SELESNICK: Some of the more exciting developments involve plans that have started carving out certain things. They’re replacing, for example, three drugs in their prescription drug formulary that are costing millions of dollars a year with a biosimilar that’s exactly the same and will save $2 million if they switch, or replacing a PBM because they didn’t understand what they’re keeping for a rebate and switching to a transparent or pass-through rebate PBM and returning all that money back to the plan.
You also see alternative plan design. Some plans are creating a medical expense reimbursement plan to sit alongside their cafeteria plan or other types of reimbursement plans that aren’t Section 125 plans. They’re Section 105 plans with tax advantages as well, and they allow plans to pay for some categories of claims outside of the network entirely, engaging in more limited network agreements so that you’re not always bound to network contracts that you don’t even know the terms of. And where I see the biggest change in CAA for plans is this realization that you’re bound to these terms and provider agreements that probably undercut your fiduciary duties. The more that is known about what provider agreements say, the more I foresee lots of opting out of certain provisions of those agreements.
Shifting gears to talk a bit about the litigation side of your work, what do you do as a litigator?
SELESNICK: We pursue two lines of cases. Sometimes we just implement dispute resolution on behalf of a plan and activate the mediation or arbitration provision inside of an administrative service agreement, and say, ‘we can’t resolve this. Let’s see if we can fix things without going to court.’ A lot of times that’s a useful way to do things like gain access to data.
When you get to the point of an intractable conflict, however, and you’re looking at litigation, we litigate in two ways. Sometimes we go to federal court if we think that this is an ERISA-based claim, particularly if there’s fiduciary liability on behalf of the vendor that you’re going to be suing. A lot of times, insurance carriers are claims fiduciaries, so they’ll take on fiduciary obligation for a certain aspect of what you’ve delegated authority to them.
In some jurisdictions in this country, the courts have found that those vendors are acting as functional fiduciaries whether they claimed it or not. And so in those types of cases, we bring them to federal court under ERISA and say, ‘this is a breach of your fiduciary duty when you did this, and the plan deserves this money back,’ or ‘you’re not sharing data with the plan’ and seeking a declaratory judgment that you have to give data and that this is the requirement if you’re hired by a fiduciary in a plan. But not all courts find insurance carriers or PBMs to be fiduciaries, so sometimes you have to find different ways to remedy what’s happening. And you can go to state court and sue under breach-of-contract, deceptive business practices or anti-competitive business practice theories.
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