Rethinking Fiduciary Duty in Employer Health Plans

As healthcare costs continue to rise and scrutiny around plan transparency intensifies, employers are under growing pressure to fulfill their fiduciary responsibility—not just to manage costs, but to ensure health plan decisions truly serve the best interests of their employees. 

In this compelling episode, we explore what fiduciary duty really means for employers in today’s complex benefits landscape. Experts break down the legal, ethical, and financial implications of being a plan sponsor—and what it takes to stay compliant, cost-conscious, and employee-centered. 

In This Episode, You'll Learn:

• What ERISA says about fiduciary obligations—and how it applies to health benefits 
• Why fiduciary risk is rising, and what recent lawsuits mean for employers
• Common blind spots in benefits strategy that can lead to compliance issues 
• Practical steps employers can take to protect themselves and support their workforce

If you're in HR, finance, or on a leadership team making decisions about your company’s health plan, this episode is your essential guide to navigating your fiduciary role with confidence and clarity. 

Transcript

HOST

Welcome to The Pulse, produced by Vital Incite, where we keep pace with what's trending in employee benefits. This series was developed to bring together nationally recognized subject matter experts from the health and pharmacy industry, as well as top academic and research institutions. Our goal is to provide unbiased information and offer scalable strategies that give you clarity amid the chaos and provide answers to your most burning questions. I'm your host, Mary Delaney, Managing Partner of Vital Incite an Alera Group Company.

In this episode, we're going beyond the bottom line and rethinking what fiduciary duty really means. As healthcare costs continue to rise and scrutiny around plan transparency intensifies, employers are feeling a growing pressure to fulfill their fiduciary responsibility, not just to manage costs, but to ensure health plan decisions truly deserve the best interest of their employees. Recently, lawsuits have given us all a heightened awareness of the fiduciary responsibilities of health plans. But it is also an exciting time to discuss what this newfound power can do for employers. As a great woman once said, “Here is the uncomfortable truth: If you can't see where your money is going, who profits from your plan, or how decisions are being made, you are not in control.” That was Chris Deacon, one of our panelists today, from her book The Health Plan Turnaround. Chris and fellow panelists Stacy and John will help break down the legal, ethical and financial implications of being a plan sponsor and what it takes to stay compliant, cost conscious, and employee centered.

So with that, let me introduce you to our incredible panelists. Well, since I've already quoted Chris, I will start with her. Christin Deacon is a nationally respected voice on healthcare reform, procurement strategy, and government accountability. She is former Deputy Attorney General and Special Assistant Counsel in the Christie Administration for New Jersey. Chris spent years practicing law before transitioning to public finance, where she ultimately served as a senior official in the New Jersey Department of Treasury. There she led procurement and policy for the state health benefits and school employees’ health benefits programs covering more than 820,000 public sector lives and representing one of the largest health plans in the country. Frustrated by a system she felt was rigged against patients, taxpayers and public servants, Chris left public service and dedicated herself to speaking hard truths on stages, with legislators and in halls of Congress about the health care status quo and structural forces that keep it broken. Her advocacy is grounded not only in deep policy knowledge and firsthand experience, but in a deep personal drive as a mother committed to building a better future for the next generation. As if that wasn't enough, she is also the author of two books I highly recommend: The Health Plan Turnaround and her newest release, The Great American Heist. Chris, thanks for being a voice for others and joining us today.

CHRISTIN

Thank you so much for having me. I'm really excited to have this discussion.

HOST

Grateful to have you in the discussion. Our next guest is Stacy Barrow, who's partner at Barrow Lent LLP, a boutique employee benefits, executive compensation and employment law firm located in Boston. He has extensive technical knowledge and experience designing and implementing health and welfare plans, and he counsels clients on issues surrounding ERISA, the Affordable Care Act and much more. This is Stacy's second time joining The Pulse. He was a great guest on our May 2024 episode discussing tight benefits contracting. If you want to hear an insightful discussion, go revisit that episode. Stacy, we really appreciate you joining us again today.

STACY

Thanks Mary. Good to be back.

HOST

And then last but not least, we have John Delaney. John plays a crucial role in leading Vital Incite’s Data Integrations team, which includes negotiating data sharing agreements with carriers within Alera's oversight services. He reviews carrier contract language to understand the employer's rights to review claims that appear to be misadjudicated and to reconcile shared savings and payment integrity fees to the underlying claims. In his experience, John has worked with numerous carriers, PBMs and other health plan vendors to secure accurate, complete data on behalf of employer health plans and support health plans across the country to improve vendor contract language. He also plays a critical role at Alera Group in improving the RFP process to help us better support employers. And in full disclosure, John Delaney is my husband and I'm thankful that we can tackle these difficult issues together each and every day. John, thanks for joining us.

JOHN

Thanks Mary. I'm really humbled to be here with this incredible panel.

HOST

We look forward to you joining us in this. So to kick us off then, Stacy, maybe you could start off by explaining what fiduciary responsibility means, who holds this responsibility, and why has this become such a significant issue now?

STACY

Sure. So, yeah, let's start out with who is a fiduciary under ERISA. ERISA adopts a functional test, meaning someone is going to be a fiduciary based on the actions that they take. So someone is a fiduciary to the extent that that person has discretionary authority or control over management of the plan or management or disposition of the plan assets. Also, someone who has discretionary authority or responsibility over plan administration is a fiduciary as well as anyone who provides investment advice for a fee. Now, of course, we don't usually deal with that in terms of health and welfare plans; most of those plans are unfunded and don't have investments. So typically the fiduciaries will include the plan administrator, and trustees if there is a trust. Most plans – health and welfare plans – don't operate under a trust and so it usually is just the corporate officials from the company who run the plan. Now, service providers such as your third-party administrator generally aren't fiduciaries per se, but they can become fiduciaries if they agree to be fiduciaries or if they exercise discretion or control over plan administration or management. So many third-party administrators will agree that for purposes of adjudicating claims and handling appeals, they will be a fiduciary for those claims and appeals purposes, but they won't agree to be the named fiduciary under ERISA.

HOST

You keep saying the word discretionary. What am I missing in that statement? What's important that you keep saying that?

STACY

So someone that is, say, performing ministerial tasks under a plan, say like an administrator that that is handling the reimbursements for an HRA, they're not really engaging in any discretionary acts under the plan in terms of determining if medical management and preauthorization requirements and those things are met. It often requires some degree of discretion from the plan administrator or TPA.

CHRISTIN

Mary, can I just add to that the cases that I've read, the discretion that becomes pivotal in some of these cases, that health plan fiduciary cases is the type of discretion that would allow you to set your own compensation. Right so when you're acting with discretion in a manner that would allow you to, you know, perhaps keep additional shared savings fees. I know we're going to talk about that, but that's really pivotal when that discretion is exercised in a way that allows you to set your own comp.

HOST

Very good. And there's a discussion of a self-funded health plan. People are employees of that health plan but are also acting on behalf of the health plan. I think, Stacy, you wanted to make sure people understood the difference in those two levels of service.

STACY

Yeah, it's not really that they're employees of the plan, it's that they're employees of the plan sponsor. And sometimes those employees of the plan sponsor who are tasked with administering or overseeing the plan, not all of their decisions relating to that plan are fiduciary in nature. There are some decisions that are called settlor or employer decisions and those are not actionable under ERISA as fiduciary acts. So a common settlor function or employer function that is not fiduciary in nature would be a plan design decision, like a decision to amend or modify or terminate a group health plan. If you were a fiduciary when it came to designing your plan, you wouldn't be able to have a deductible or coinsurance or copayments. Everything would be zero. There'd be no participant cost-sharing. But employers when they're designing the plan aren't held to that fiduciary standard. But implementing those settlor decisions are fiduciary acts. So communicating with employees, employee communications are always fiduciary in nature. So that line between the settlor acts and the fiduciary functions is often hard to draw, particularly when the plan sponsor, the employer is also a fiduciary at times when they're the plan administrator.

HOST

Very good, thank you. I appreciate that extra piece there. And then, like Chris, I feel like there's a lot of negativity around this fiduciary responsibility and fear mongering, almost. Can you share what you think is happening right now?

CHRISTIN

Sure. So I do agree with you that oftentimes vendors and those who speak to groups of employers use the sort of threat of fiduciary litigation or ERISA litigation as a motivator to try and get employers to be more engaged or perform certain functions or you know, sometimes whatever that point solution vendor does, or a certain vendor that claims they can, they can fulfill a fiduciary obligation of the employer, and using again that threat of litigation. But I think, you know, it's really important to not only think of fiduciary duty as a litigation point, you know, a stick, so to speak. We really have to think about fiduciary principles as a carrot. When you use the fiduciary framework to run your plan, you know, sort of thinking as fiduciary duty as not something you do, but as a principled model for decision making, you're going to make smart decisions and your plan is going to perform. You're going to be able to address rising costs and be proactive. You know, I think it gives us permission, you know, to ask those tough questions and demand transparency. So I think we should sort of reframe how we look at fiduciary duties to not just be a box-checking exercise, but to really embrace it as an opportunity to do better.

HOST

That's great. I love that idea. And in that discussion you always…I have read your books and obviously follow you quite a bit because I appreciate everything you're doing. The power of data. Explain why you think that's so imperative and why you've been willing to fight for this.

CHRISTIN

Yeah, so I think you can really think about data as the foundation to being a fiduciary. If you think about the 5 sort of principles of being a fiduciary, you have your duty of loyalty, duty of prudence, duty to follow plan documents, and finally duty to only pay reasonable plan expenses. You cannot do those things without making an informed decision. And being informed requires that data. I think that you could attempt to do a lot in a manner that, you know, is acting prudently, but really in order to fulfill those obligations, data is the foundation that we, that we build from.

HOST

I love that, considering I'm kind of a data freak. And I do believe that it also helps explain things in a way that these individuals who step in as fiduciaries really can understand and see where they can respond. And John, you know, as Chris mentioned, data being essential in supporting employers’ decisions. You deal with this every day in trying to capture data. What barriers have you found?

JOHN

Yeah, thanks Mary. You know, what we found is that in most cases the agreements between the employer and the carrier as the service provider don't address the carrier's obligation to provide, for instance, claims-level detail or data back to the employer. So as a result, the degree to which the carrier will provide claims-level detail and the associated costs with that tend to really be based on the carrier's internal policies and protocols, and those are not spelled out in the contract for the employer. And if the employer doesn't ask about it, it creates unexpected barriers to getting that data. And some of the things that we see over and over again, we see unreasonable fees that the carrier wants to charge just to give the data back to the employer. You know, we view this data as being the employer's data and yet they have to pay to get it. And it can be sometimes cost prohibitive. We also see where carriers will limit the data or the willingness to give data if the group is not of a large enough size. And that even extends to self-funded employers who bear all the fiduciary responsibility to manage their health plan. And yet they can't get access to their data because they're deemed to be too small. We often see the carrier hides behind HIPAA and PHI as an excuse not to provide claims data to employers when, especially for self…again for self-funded groups, that's not a valid reason. We've even been able to work with fully insured groups to get them to provide a, a HIPAA certification to allow them to get that data. But out of the box, carriers are often not willing to provide fully insured groups with any data.

Just kind of wrapping this up, some of the specific limitations we see with data being withheld. We have some carriers in South Carolina and Florida that, they're just unwilling to provide claims detail that shows what they're paying a provider or providers for various services. And they kind of hide behind the contracting that they have with those medical providers, which they claim prohibits them from sharing their reimbursement rates with the employer. We have also seen, uh, for instance in Tennessee and Massachusetts where for fully insured groups, the carrier is absolutely unwilling to provide what the amount that they're paying for pharmacy claims. They just withhold the payment amount, which makes the data very non-actionable. And then the last thing we've seen that I was able to think of is there are federal law and state laws related to what is generally called sensitive diagnoses. And at the federal level that relates to substance use disorder type activity or type of diagnoses. And we often see that there's masking of those claims. And if it was limited to just SUD or substance use disorder, that might be okay, but we see it extending to conditions like HIV or a pregnancy scenario or mental health and things like that. And we can end up seeing as much as, oh, 30% of the claims dollars being masked because of “sensitive diagnoses.”

HOST

It's interesting you bring that up. I know we had one carrier we've now resolved, but they tried to also mask obesity. And in this day and age where we're struggling to help employers deal with the GLP-1 epidemic, tsunami, whatever you want to call it, you can't help support your plan if you don't have the information. And I know one of the things that we have been pushing on is to put these details within the RFP language because if, you know, I love salespeople, they say yes to anything because they want to win the case. And then when they win it, you have proof that they have committed to this. And I know, Chris, you even mentioned that. So do you mind expanding on what you think employers really need to be doing, just to salvage this?

CHRISTIN

Sure. The approach we used in New Jersey, I think, really works. And I understand that we were a whale of a plan. So not everybody has the ability to do what we did, but they can do a flavor of what we did, and that is to set some of the contract terms up front. And, you know, you are only qualified to bid on my business if you agree to these terms regarding, you know, data availability, and what we did was sort of put the contract in the RFP and if you were willing to agree to these terms – these very specific terms – you were then qualified to bid on the business. Now again, I know that that's a big ask for, perhaps, smaller employers. So what I've seen done and what I've suggested other employers do, um, the 32BJ Health Fund did this as well. They sent them a contract to redline and, you know, all of the potential bidders so that they could see in advance of the award what were non-negotiables. You know, were they willing to agree to some of their non negotiables, or not? If they're not, you know, that dinged them in terms of the evaluation. So again, I think being super crystal clear and not just are you willing to give us your data, but are you willing to give us, you know, will you give us our data at this frequency, in this format, in this manner, without cost? I think that sort of detail is really, really key in getting up front.

HOST

That’s great. John, were you trying to say something there?

JOHN

Well, you know, that, that kind of dovetails, uh, Chris, with what we…we promote our clients to try to work into their agreements or into an RFP if they're going out to bid. The data request should include full claims-level detail, so any claims that are processed, they should be able to get that information. And we go so far as to provide a layout of the actual data fields that we expect to receive back. You know, and it's a broad range of data. You know, it's demographic information of all the members. It includes the, you know, procedure codes, diagnosis codes, DRGs, revenue codes, place of service, provider information, paid information. So that all gets spelled out ahead of time. And as you said, you can work that into an RFP and therefore they're committed. We like to see historical data so we can do trending. So in the case where an existing employer, or an employer is going to their existing carrier to get data, we want them to go back 3 years for trending. And then we always like to get run-out data as well. Meaning if the employer decides to move away from the carrier in the future, the carrier still has to commit to provide data all the way through their processing of the claims so that the employer continues to have full data. And of course the data has to be provided for free. It cannot come with a cost. And then we try to spell out, again, limitations on masking related to sensitive information so that it's down to the bare minimum – maybe only substance use disorder, for example.

HOST

So I know you've had success in the file layouts. What about other contract language? Any experiences that you've had with that that you want to share?

JOHN

Well, it's interesting. Just recently, Alera was successful working with an Illinois carrier on behalf of one of Alera's clients to work in a provision into the ASA ASO agreement that permitted the employer or its designee to investigate claims that the employer believed could have been potentially mispaid. So this was a wonderful provision to get in there, and, you know, the carrier put in some qualifications, meaning, you know, that there needed to be reasonable evidence that suggested that the claim had been mispaid before the employer could raise it as a question. But nonetheless, it opened the door for starting to investigate claims, because otherwise these agreements typically don't include any sort of claims investigation-type provisions. There are audit provisions often in there which we can talk about, but those are different than investigating claims where you believe they've been mispaid. So that was a, you know, a beneficial provision that was able to be worked into the agreement.

HOST

And…what happened after that?

JOHN

Well, coincidentally, it seems like soon after that, Alera was, as the broker was noticed by the carrier, that in order to enact this provision, and we understand that this carrier is doing it not just with the Alera client, but also more broadly, in order to enact this claims review process, the employer needed to agree to pay $100,000 to kind of initiate the process, and then a per-cost, a per-claim cost of like $860 for every claim that was going to be investigated. So this came as a big surprise to Alera and their employer. And as they started to push back, the carrier quickly came off the $100,000. So now that's not a fee that they are asserting they're going to charge, but they are still asserting they need to charge a per-claim fee of $800 to $2,600, depending on where the claim is in the process of adjudication to investigate those claims.

HOST

So we're hearing, you put the language in, you find an error that the carrier makes, and the carrier is still finding a way to make money off of it. Chris, thoughts?

CHRISTIN

Yeah, it's, um, I've seen that proposed amendment that employers have gotten and yeah, it's $860 per claim, uh, $2,600 per provider that you want to…that they want to flag. And in addition, the employer has to agree to engage their payment integrity process first. And, you know, any third-party review has to come at least 120 days after the claim is adjudicated. So, you know, sort of, take…making you take the last bite of the apple. Yeah, it's, it's egregious and unbelievable that these types of things can be floated to employers. A few employers that I saw that got this actually sort of started talking amongst each other and decided to band together and push back collectively. That's still playing out, but they had given the employers a September 1st deadline and they haven't restricted these employers yet. So take that as a win, I guess, because for most of these employers there was an ongoing process already and they were doing payment integrity with a third party. So yeah, it's, you know, we've seen that, seen other carriers do a similar program requiring employers to engage in their direct-to-client payment integrity review. And essentially it's, well you need to pay us to review the payment integrity vendor that you hired, because we didn't do our job in the first place. You know, it's like, you know, hiring a contractor to renovate your home and telling them that they can pay themselves a bonus every time they come in under budget. It just doesn't, it doesn't make sense. Nonetheless, employers are getting these notices, but they are pushing back, and I think they have a good ground to stand on, obviously.

HOST

So pushing back for, in our situation, our fear is that we've not signed an agreement to say we're going to accept this ridiculous per-case claim, carriers can go ahead and try to do a direct withdrawal for these clients and take that money back. So what are your, what are your employers doing about that?

CHRISTIN

Yeah, I think they're trying to figure it out. Like I said, they're speaking amongst each other to try and do some peer learning to figure out what's working for different employers, what isn't working, which vendors are willing to be more flexible, which aren't. But I do think that the more employers who start to acknowledge that they need an objective third party to do these claim reviews, and letting the fox guard the hen house alone is not enough in order to fulfill your fiduciary obligation, the stronger the pushback is going to be. I think the threat to some of these big TPAs carriers is existential, because within that data lies a lot, a lot of truth, which I think is going to be pretty scary. So, you know, employers were blockaded before. I think that the blockading is going to get even more sophisticated until the levy breaks and I don't know when that breaking point’s going to come.

HOST

So the rights of the employer to handle any of this are in their contracts. Stacy, why has this been such a mess and what can we do about it?

STACY

Well, one thing is I think that not all employers that are exploring self-insured plans will have those ASO agreements negotiated by counsel. I suspect many of them are kind of looking at the financial terms and if they look okay, they go ahead and sign them. And then you get into the situation that John talked about when you have a, a claim that you want to investigate, looks like it's overpaid or something, the TPA can turn around and say well that's addressed in our audit provisions and you have, you know, one chance to do an audit, it's going to cost X amount. There's, you can sample random claims and so it's not all that helpful. We hear a lot from employers – well, you know, they, the TPAs won't negotiate or we can't really get any changes. And that's not true; if you have to, you say it in a certain way, have a legal basis for what you're asking for. And we routinely get carriers and TPAs really to move on things like term and termination provisions, indemnification, limitations of liability, dispute resolution provisions, you know, the, the more pure legal issues. But this is also the time to get in all those terms on getting access to data and I, I will share that. It, frankly it's kind of easier for us to get around and negotiate the indemnifications and limitations of liability than it is to build in real good access to data. But it's, you know, the pre-contracting phase is the time to do it.

HOST

I'm sure we're all thinking the same thing. We know darn well the reason they don't want to give us access to the data, because there's things they're hiding – profit margins that they're trying to spare that are now at risk. And I'm pretty confident that the carriers are running terrified because there is a lot of mess in how they adjudicate the claim. I know we find that on the same claim line if we go to match controls we can find data elements that are…you would think that they're paying the provider the amount, but they're actually paying a percentage of that back to themselves. So the provider is even getting paid less than you expect. But the carrier could be making money off of each claim even which is, as a person who used to bill as a provider, disgusting. You work so hard for the little bit you get paid, and to find out the carrier is making significant monies off of that are pretty astonishing.

CHRISTIN

Well, I think that that's one of the reasons, that's why I say it's existential, because, you know, employers have been led to believe for the last how many years that, you know, they're getting the best discounts and these healthcare costs are just out of control, and it's because of the providers, right? We can't control the cost of healthcare. We're just the middleman passing it through. But when you do get a chance to look at your own claims data and then also some of the transparency data that's out there, right, you can see what other payers are getting, uh, paying for certain services at certain hospitals, etc. You know, you will see that, for example, at Penn, if I paid cash, I would, I could get my ACL repaired for about $1,200…I'm sorry, $12,000. But if I use my Independence Blue Cross Blue Shield card, I can expect my employer to get a $45,000 bill. Right? So I'm paying for the privilege of using that card, and employers are going to wake up to that. And again, that's why it's existential, because the value proposition of these middlemen, and what we've been led to believe as employers, and, you know, the emperor has no clothes.

HOST

Well, it's interesting, we had a case where we questioned the amount that was being paid for a specific service, and after many volleying back and forth where they gave us bogus answers, kind of behind the scenes under their breath they said, yeah, we're just paying percentage of billed and we're not auditing billed. And I happen to know someone behind the scenes that said, yeah, well we had to cut a deal with that provider group to get them to cut their rates on something other employers were complaining about, like an MRI, something really simple they could find. So what we did is told them, if you give us this deal, we'll let you bill your medications through the medical plan or your imaging at whatever you want, and we'll just pay you 80% of it, and you're going to make up more than your margin in that. And if you haven't looked at that as an employer, that's really scary how different things are being billed at, the different rates they’re being billed at and what you as an employer are paying for.

CHRISTIN

Yeah, absolutely. I mean, the same with Medicare Advantage rates. You know, you can see any, any service line that the carrier is actually at risk for. Oftentimes those rates have been negotiated much lower than some of the, the commercial self-funded plan, uh, plan rates. There's all kinds of games, again, hidden in the data.

HOST

And we can actually see in communities where a private practice was being paid at a certain level, you know, much lower than everybody else in the community, and suddenly the carrier purchases them and they get a 30 to 40% increase for the same service, same providers. It's just now someone else owns them and all of a sudden the carrier can give them a much higher rate once they've beaten them down so far that they had to sell. So employers lose in all of these situations, and actually our communities and our healthcare outcomes are losing too.

So, alright, now you guys have got me all worked up. We're going to move on to another issue that is a really big deal. But it's these audit provisions and these shared savings and payment integrity…all these wonderful things that are being offered to these carriers. Each of these topics could take an hour or a year to try to figure out. But what do you think employers or advisors need to hear today to understand that a bit more? John, do you want to start us off on this one?

JOHN

Sure. Quickly, on audit provisions, and Stacy mentioned it briefly…so, many of these agreements have an audit provision and it tends to be the only recourse that an employer can take to have, to make sure their claims have been properly adjudicated. But it's woefully short. The specifics of these provisions, first of all, if the employer wants to undertake an audit, they generally have to pay a fee. They can only use carrier-approved auditors, which is pretty hilarious. But that's often what we see in these agreements. The claims that can be reviewed can only be selected on a statistical random basis. So let's say hypothetically an employer could have 250,000 claims per year, not uncommon. You only get to pick 250 claims to look at. I mean that's, that's 1/10th of 1%. So it's tiny. And what's interesting, if you find misadjudication in that, in that review of 250 claims, you don't get to extrapolate that to the total population. So let's just say for instance, you, you undertake an audit, you look at 250 claims and you find maybe $1,000 of missed payments. Well, if you extrapolated that, that would be a million dollars. That would come back to the health plan. But they put a non-extrapolation provision in there, therefore all you would get back is 1,000. It's not a real actionable provision. And really what it does is, if, as Chris has said, if you go out and get your data and you have data and you can now see claims that you believe have been mispaid, well, that doesn't fit within this audit process, because the audit has to be a random sample. So you don't even get to – unless you work in a provision into your contract to do a claims review where you believe things have been mispaid – you can't pursue those. So this audit provision is not a solution for that.

HOST

Were you going to say something, Chris?

CHRISTIN

Three years ago, I would have said, because of the passage of the Consolidated Appropriations Act, that it was very clear that employers had access to their data and had the ability, the legal right to share that data with a third party business associate, you know, if the appropriate HIPAA protections were in place. But that just absolutely hasn't played out. Again, I think that there's recognizing that there are legal rights that we have and then there's actually putting them into practice and enforcing them with some of the vendors in the market today. So I do think that there are challenges that need to be remedied, whether that's through Department of Labor or, you know, improving the CAA or federal law. But, you know, again, I think it's important to acknowledge for employers that yes, this is a legal right, but we just, we haven't gotten there yet in practice.

STACY

Whenever you see percentages, just alarm bells should be going off, and you should understand exactly what's going on here, you know, and further, you know, really just analyze the types of fees and compensation that's in the agreement. Is it per employee per month, per member per month, per engaged member per month? Are the fees a percentage of the savings? Are they a percentage of the recovery? How are payments flowing from third parties, like with rebates and service fees? And how are rebates coming in to the, to the administrators? And then I guess, you know, one other point, you mentioned it before, uh, about using all this data. You know, we, we have all this new information that's available under the Consolidated Appropriations Act, right? You have the removal of the gag clause. You have the RXDC reporting, the prescription drug data collection reporting. You have the publication of the machine-readable files, the maintenance of a price comparison tool. There's a lot of information out there. And, you know, query whether you had a duty as a plan sponsor to go out and find this information. And, and maybe you should have your RXDC reporting and submit it yourself and not just rely on the TPA or PBM to do it. I, I hear that they're, they're usually pretty happy to do that for employers to, you know, submit that data themselves. But maybe there's a play to, to bring that in-house.

CHRISTIN

If I could just give one example on the shared savings. I mean, it's pretty egregious, but it makes the point. There was a case out of California, a TML services recovery case involved Cigna. And so during that process, some of these claims were revealed in the court proceedings. And there was one claim in particular where the employer actually paid over $4,000,000 for a claim. It was a high cost-claimant inpatient psych claim. So the amount that the employer paid was over 4 million. Now of that 4 million, $875,000 went to the provider, over 2.3 million went to Cigna, and over 675,000 went to MultiPlan, their vendor. And that was as a result of a shared savings clause in the ASO agreement that allowed Cigna and its subcontracted vendor to keep 29% of savings. So, you know, on the one hand, yes, we want our vendors to be incentivized to spend planned assets prudently, but when you have an incentive that encourages an inflated bill, right, and payment then at the, at the lowest rate to maximize your profit margin in the middle, to a point where you're paying over, you know, almost 80% of what's coming out of your account is not going to a provider. Like, that doesn't mean healthcare is expensive. That means the middleman is expensive. Right? Only 875,000 of that actually went to paying for clinical services, which again, it's a stark example. But of the thousands of claims in that case, over 79% of the time the carrier and their vendor was getting more than the provider.

HOST

I love that case. Not for the benefit of the employer, but because it is so egregious, I think it's easy for employers and advisors to understand why this is so wrong. We frequently see, and I know in that case the provider actually billed, I believe about $900,000 the first time, and the carrier went back and asked them to unbundle their claims, and that's how they got to this crazy amount, because then the billed amount was much larger so they could get paid a percentage of billed, which gave them this windfall of money. And I will tell you, it is striking how many times we see a provider paid at one rate and then you see them get reimbursed and suddenly they rebill at a higher rate. And the cost of that service goes way up. And when you ask the carrier, they get really quiet. It takes a lot to get them to answer those questions. So it always makes you question if you're not willing to respond, what does that really mean?

John, I think you were going to go in earlier and we kept getting sidetracked, but we talked about all these shared savings. What have you dealt with in the different provisions that you see and the ambiguity?

JOHN

Well, just, let's do a level set. Most of the time when a contract is being negotiated, the main focus is on what will that monthly fee be for the carrier or TPA services. And oftentimes that's called an administrative PEPM, like per employee per month fee. Maybe it ranges between $25 and $50 per employee. That I think is often the biggest focus because it is the largest amount that is going to be charged, and it includes claims adjudication services and other services. But interestingly, it doesn't include all of the claims adjudication services. And that's what opens the door for there to be these shared savings or payment integrity services that are above and beyond the services that are built into the monthly PEPM. And they're kind of promoted by the carrier as kind of cutting-edge services, um, highly focused efforts. And they do it in a way that maybe the employer will get excited, oh, I've got these extra services my carrier is doing to scrub claims. When in fact you would think, why is this just not part of the normal adjudication of a claim? So what happens is, if the carrier is employing these extra services on a particular claim, and sometimes these services are even done before the basic adjudication of a claim, or it's done afterwards where they might claw back money. And if amounts are deemed to be to the benefit of the employer because of these services, the carrier gets to keep a percentage, as Chris was mentioning, somewhere between – depending on negotiations – 20 and 40% of the amount that the employer theoretically saved. Because again, in Chris's example, the employer really didn't save any money. I mean, the carrier negotiated a rate and then kept a portion – a big portion – of the difference from what was billed. And so we have seen where these shared savings amounts can amount to another $5-$10 PEPM on top of the base rate that you're negotiating. So it's just another revenue stream for the carriers. Again, they try to use it as a marketing tool to say that they've got better adjudication processes, but they don't build them into their primary fee and they charge extra for it. Now, what we've tried to do is, one, figure out what triggers certain claims to be reviewed in these higher-level manners, like, you know, what are the protocols for the carrier. Not easy to get them to disclose that. And then we also question why are they not part of the basic service? But importantly, what we're trying to do now is get a list of the claims for a carrier on behalf of our clients that were subject to these extra services – these payment integrity or shared savings services. So we can see what was initially paid, what was maybe clawed back, did the employer get that clawed back amount and then what was the fee that the carrier kept. So we can kind of see, you know, scorekeeping on this and start to figure out – because we have claims data as well – what might have been able to have been determined and adjudicated from the front end, on the front end such that they didn't need to charge this fee. So there's a lot more to come here, but we're just starting to scratch the surface.

HOST

It's interesting you brought up, and I had forgotten about that, is also continue…every employer and advisor needs to continue to track once they say they're going to get a refund, that they actually get it. We actually just recently had a case where the carrier finally agreed they needed to refund it, but we actually saw in the claims that they had, that they rebilled the provider and they refunded the second bill but never took away the first payment. So basically they didn't do anything, and we had to go back and they said it was an administrative error. But I'm not sure I feel confident in that. Because we usually can't find those refunds as easily as you would expect going back to the account. Any other thoughts from anyone on this now?

CHRISTIN

Yeah, I think other than to say whenever you see savings, whenever you see ROI, whenever you see words like this that sound really enticing, don't just trust the methodology and math that went into it from the vendor. And I would say don't even necessarily trust the Milliman Report, the Rand Report, the whatever entity that they've hired to validate their methodology, you know, read it with a very, very keen eye to looking at the financial incentives that that savings model incentivizes. Right? So on shared savings, that savings model incentivizes inflated bills and overpayments. I don't want to incentivize that and I don't want to reward that. Right? So I think those are the kinds of questions that you have to ask.

HOST

It's more the concern that as an employer they carry the responsibility of a fiduciary. They're asking these questions, they're trying to get the contract changed and they get pushed back. And they're not…they can't get resolution to really do what they need to do to hold the power that they should have. What does that do to the employer's responsibility? This is where all the lawsuits…the concern that they have that there's going to be litigation.

CHRISTIN

Right. Yeah, I think, you know, I don't…we can't boil the ocean, but employers can be very focused on some very key priorities for them. And again, laser focus on those. For example, getting data being one of the most important because it is foundational. You will get pushback. You will…this, this isn't easy stuff. And, and please don't take, you know, sort of this instruction as me thinking that any of it's easy. It's not. But you have to keep pushing. It is like pushing a boulder uphill in many cases. What, what I will also say is you have to be, you know, your most important leverage in any of these discussions is your business. And the threat of losing your business has to be real. Again, if you're in a market where that's possible, I get that some aren't in that market, but the threat of you leaving has to be real. If you do not have that capability or even if you do, some of these practices are so egregious that I am not averse to taking some of these practices public. You know, one of my favorite stories from Marshall Allen, I remember I needed to deal with sort of an issue with out-of-network chiropractic providers really gouging our plan in New Jersey because of our plan design. Long story short, the average chiropractic visit was $687 for our teacher's health plan. And they were getting a lot of visits. They were setting up shop in lunchrooms. It was bad. And we couldn't solve it because we couldn't get some reforms passed because of political reasons. I called Marshall. I told him what was happening. There were teacher strikes because of wages around the state. And I said, this is happening at a time we're paying $687 per chiro visit. He published a story on it and a week later changes were passed, reforms were passed within our governing body, and the problem was solved to the tune of $100 million a year. So there is something to be said for a creative sort of press play or at least public, you know, making certain behaviors public because they can be quite embarrassing when they are that egregious.

HOST

I love it. And I know you've mentioned a few employers banding together in communities. We are so fortunate to be in Indiana. We have a lot of clients in Indiana. And the Fort Wayne market is known as being really expensive because of one hospital system in particular. This hospital system was getting paid $85,000 for an outpatient total joint. Absolutely absurd. It should be like 23,000 at most. And what the employers did is they said, hey, we'll give you my employees, I can't do anything, my carrier won't help us. Or you know, they say they can't because of the system, etc., but what they did is just said, we're going to give you free transportation back and forth to another facility where it is 23,000 and we're going to give you a PTO and stay at a hotel, etc. Literally 4 weeks later, that healthcare system and the carrier dropped those rates 30%. 30% in just a few weeks. And we had been arguing for years. Stacy, I know you have some hope that there's some legislation out there that's going to create change. Thoughts?

STACY

Yeah, there is, actually, I think a pretty interesting piece of legislation out there called the Patients Deserve Price Tags Act. And it was just introduced mid-July by Senator Marshall, a Republican from Kansas. And it attacks transparency on a few levels. One is it tries to strengthen the hospital price transparency requirements which we've seen pretty low compliance with among hospitals in terms of publicizing their standard charges for items and services. But when it comes to group health plans, the intent of this law is to increase access to data. And they do that by amending the same section of ERISA that gave us our broker compensation disclosure rules that are new from a few years ago. And it basically says that contracts between a group health plan and a covered service provider, like a third-party administrator or a PBM, the contract, the ASO agreement is not reasonable unless it allows the plan fiduciary access to all claims and encounter data. And it's very broad like it references the gag clause rule, but there are a lot of limitations under the gag clause rule. This really enhances it, adds some data elements to be included, and it also says you can't unreasonably limit or delay access to this information. And it goes on to specify things like value-based payment arrangements, capitated payment arrangements, and it does require the information to be provided consistent with HIPAA, but there's just a ton of information to be disclosed here. The penalties for failure to comply are very significant. One provision, there's a $10,000 a day penalty. There's a different type of provision that could go up to $100,000 a day penalty. While this law is – or bill, not a law yet – while the bill is new, you know, it has some chance of being enacted. You know, you can look on GovTrack US. It's a great place to track proposed legislation. And it came right out of the gate with an 8% chance of passing. I know that seems low, but many bills come out with a 1 or 2 or 0% chance. So 8% is not, you know, not, not something to be laughed at.

HOST

Although I did chuckle when you said that because it just made me think of Chris just saying it's like pushing a boulder up the hill. Go ahead, Chris.

CHRISTIN

Yeah, so I had the, the pleasure of testifying before the Senate HELP Committee over the summer. And Senator Hickenlooper is also a sponsor, co-sponsor on the bill. So it is, it is a bipartisan bill with Marshall and Hickenlooper and more— they're getting more co-sponsors as we speak. And this is an issue that, it's a 92% issue across political lines. My key takeaways from that hearing, because you have sort of your witnesses that are aligned with certain members of the party. And so you had Bernie Sanders witness and I was Senator Cassidy's witness. But what we all agreed on was that transparency is key and data access is foundational for employers. Everyone from myself to Wendell Potter to Senator Sanders agreed on that point. And I thought that that was really powerful.

STACY

Maybe just add a quick thing to piggyback off of what Chris said earlier. In terms of ERISA's fiduciary duties, the basic duties are loyalty, prudence and adherence to plan documents. As long as the plan documents are consistent with the law. So, how that translates to contracting with service providers, you have to exercise the same skill, care and diligence that another prudent person would exercise in a similar circumstance with that person being reasonably skilled at the task at hand. Whether you were prudent is determined at the time you made the decision. It's not subject to hindsight. So, like in the 401k context, you know, maybe your costs are higher than average, but doesn't necessarily mean that you made the wrong decision in picking your investment advisor. So, you know, the key is just to, as much as possible, be prudent in selecting and hiring your service providers, and consult with experts as necessary. Use that RFP process, and also continue to monitor your service providers. If there are complaints among your plan participants, you need to investigate that. And then lastly, just because you asked before, Mary, like, you know, what happens if a plan can't get these contractual provisions that you've been recommending? Because sometimes it just doesn't happen. And the bottom line is, if there are losses to the plan, then the employer may be responsible for making good on those losses.

CHRISTIN

Yeah. And I would just add to that. It's not about making, you know, you have to make the best decision or, you know, pick the lowest price or pick the right vendor. You have to go through a prudent process in making your decision, and you have to document that. You know, to your point, if you are looking for these, you know, contract provisions that you think are in line with your fiduciary duty, you know, document the asking, document the denials, document the reason for the denials, document that you went through a process with your general counsel or outside counsel to actually push back and treat it with the seriousness that it deserves. And yeah, you know, you're not, you're not going to find yourself on the receiving end of a lawsuit.

HOST

I'm sure that's good news to everyone's ears because it is not winning, it is doing your best is what we're looking for here. So, I'm going to try to just reiterate the most critical things, and you guys have covered so much, so forgive me, that I'm going to boil it down to just a few. There is this newfound power with this fiduciary responsibility. Some have chosen to make it a scare tactic to create fear, to think that you have to do everything. But really, this is finally employers understanding that they do have a power and they need, they have rights to be able to make things better. They don't just have to open their checkbook. Stacy, you spoke a lot on discretionary responsibility. So when are you making a decision that is critical and basically setting up some compensation criteria? That data is the foundation. I've heard Chris say this over and over again. Data is foundational. It is the most critical first element because you have objective information and that objective information allows you to act as fiduciary, meaning the duty of loyalty, prudence and adherence to your plan documents. John brought up the, all of the issues related to claims-level detail, how you need to outline that in your contract. And then the best approach is to put that in your RFP. Because you, and I, like what Chris said, is that you can start off your RFP: “You're only qualified to bid if you will accept these terms.” And if you're a smaller company, at least ask for their contract to be brought in so that you can redline them and have that be part of the negotiation process. I think that's really critical because these contracts are written by these really well-paid big companies, and then these poor little companies come in or even some larger companies I've seen try to save money, skirt around not having a lawyer negotiate everything, and they sign things, which I think is really where we, why we're in the position we're in today. And go back and put objectivity in related to your audit provisions. Try to remove letting the own…carrier audit their own data with their own people that they're going to make money off of. Sorry to simplify it that way, but that's how I feel. That's my subjective input on that one. And make sure the details are outlined. What exactly are they going to do for their administrative fee? When does it flip to another wonderful product that they're offering? And how can you make sure you have the right data to audit that? Because you should not just be accepting that. We have talked a lot about why that has created so many problems. Is there anything I missed or anything any of you want to add?

JOHN

I was just going to say related to that last point about shared savings and payment integrity. I don't know that you can negotiate those out of the agreement, but I have seen and heard where you can negotiate caps for the amount that the carrier can make during an annual period off of those, those extra adjudication processes that they're so proud of. Put a cap, a PEPM cap. Also negotiate the percentages. I have absolutely seen where some are 20% and some are 40. Get it down as low as possible and then put a cap in.

HOST

It's great, great point. Thanks for pointing that out. All right, with that then, I just want to thank our panelists. You guys are excellent. I appreciate everything you're doing on behalf of employers, advisors, reforming healthcare. What you shared today was truly insightful and inspiring. And to our audience, I hope today's conversation has given you valuable insight to reflect on your current strategies and perhaps even spark some ideas about your best next steps. We all need to start pushing this boulder up the hill, and I think we can do it together one step at a time.

In our next podcast, we're going to revisit the primary care crisis in the United States. In our previous episode, we explored the access issues from the provider's perspective. This time we're going to have conversations with the carriers who have implemented the strategies they believe are successful, and some carriers who will just explain where they hope to go. Either way, it will give us insight into what they're thinking and how we may influence the market. I am confident this conversation will be interesting and I think it's absolutely critical.

Thanks for listening to this episode of The Pulse. If you enjoyed it as much as we did, be sure to subscribe so you always stay up to date on our most recent conversations. Share the link with others so we can start to demand something new. And please share this conversation with other employers that you can band with to make a difference. And as always, please follow us on LinkedIn.

The Pulse is produced by Vital Incite, an Alera Group company. Alera is on a mission to help organizations identify medical spending waste through data-driven strategies, while helping to improve the health of their employees. I think that aligns with fiduciary responsibility. So if you want to make healthcare easier to understand and manage, and improve your organization's bottom line, reach out to us at vitalincite.com. I'm Mary Delaney. Thanks for listening.