Health benefits

This federal law will completely overhaul corporate health benefits. Nobody is ready.

Most employers don’t know if they are getting their money’s worth. Employers rarely see data on health care provider performance, such as infection rates or outcomes. Contracts with pharmacy benefit managers, health plans, and consultants often hide the true costs of services. Sometimes employers are even denied access to their own claims data (although they are never denied the obligation to pay those bills).

It drives employers crazy. So they pushed for transparency in healthcare and succeeded three times this century. In 2005, the Bush administration began requiring Medicare hospitals to report serious errors. In 2009, the Affordable Care Act, also known as Obamacare, required even more patient safety and quality reporting.

Now comes the third major transparency policy change: the Consolidated Appropriations Act (CAA) of 2020. Unlike previous reforms that pivoted on the Medicare program, this one focuses on employers and other benefit purchasers. healthcare providers, referred to as “plan sponsors”. “Surprisingly, many employers seem to be unaware of this major upheaval in the laws governing their health insurance plans.

The CAA has the rare distinction of being supported by both the Trump and Biden administrations, and by both parties in Congress. The law puts employers more in the driver’s seat to impose good value on suppliers and vendors, and prohibits hidden contract terms that disadvantage employers and their employees. That sounds ideal, but in the short term, employers face significant hurdles in complying with the new regulations needed to put all of this in place. “I kind of feel like the dog that grabbed the car,” said one of the law’s leading employer advocates, James Gelfand of the ERISA industry committee.

Compliance involves new rules and expanded responsibilities, including:

o Removal of gagging clauses from service provider contracts, including health plans, third-party administrators, consultants, brokers, pharmacy benefit managers, and any other entity involved in health benefits. No more complaint data withheld other than privacy protected data.

o Pharmacy and prescription drug price reporting requirements.

o Disclosure of direct and indirect compensation of all service providers, so that hidden incentive agreements between brokers and plans or PBMs and pharmaceutical companies must be fully addressed.

o Parity between mental health and addiction benefits and other health benefits. The CAA establishes a much stricter parity requirement than employers are used to, including significantly improved documentation requirements.

Plan sponsors — not third parties like health plans or consultants — must demonstrate to federal officials that the health benefits they offer are cost-effective, of high quality, and meet mental health parity requirements and pharmaceutical benefits. They must disclose everything to their employees.

In practice, employers and employees will become more aware of the full range of prices and costs, including hidden fees and incentive agreements between healthcare providers, suppliers, service providers and other intermediaries. Employers should brace themselves for a shock once they learn some of these numbers. They must also be prepared for difficult conversations with suppliers.

Why do employers seem to ignore all this? Maybe it’s this: Suppliers who dread tough supplier conversations are often the exact people employers rely on to alert them to compliance issues like CAA. These providers may not be in a rush to alert employers to revise their contracts. Indeed, sellers need not rush, because employers, not their sellers, are the trustees in the crosshairs of regulators.

But employers need to rush. The law enforcement Department of Labor has already started requiring documentation from some employers, and to date, none that we know of have been found to be CAA compliant.

It will not be enough to examine current contracts with known suppliers. In healthcare, the challenge of creating value may involve deepening the quality and safety of services provided to employees and their families . This will reveal glaring problems. For example, more than 500 people die every day in the United States from preventable medical errors, and patients are twice as likely to die from preventable harm in some hospitals as in others. The wrong hospital is never good value at any cost, so trustees are wise to give employees tools to make informed decisions.

Employers can put in place the necessary steps to document that they are making at least the effort to comply. Several national, employer-run nonprofits, including my organization, The Leapfrog Group, offer free webinars, toolkits, legal opinions, and other advice. Some companies like TILT that independently advise plan sponsors offer free background information and step-by-step guidance.

Regardless of compliance issues, the CAA’s ultimate vision is good: a more transparent healthcare system, eliminating hidden business arrangements that don’t serve the best interests of consumers, and giving employers and employees the tools they need to get better health care. For a long time, this level of transparency has been the dream of employers. Now the dream has come true, the alarm is sounding and it’s time to wake up.