June 20, 2019
The Senate Health Education Labor and Pensions (HELP) Committee released its long-awaited text on ideas to combat rising healthcare costs, which includes everything from surprise billing, cost resolution, emergency air services, biologics, access to generics, gag clauses, access to claims data, health data modernization, maternal care and vaccination education.
We expect the Senate HELP Committee to mark up the legislation by next week, and we are currently working with members of their staff on the bill’s language.
Section 308 of the draft legislation contains a component on the disclosure of direct and indirect compensation for brokers/consultants to employer-sponsored health plans and individual market enrollees.
The Council’s view on transparency is that brokers should advise their clients of their compensation in the most effective way of their choosing. The Council’s policy dates back to 1998 and has consistently emphasized a transparent approach.
The Senate HELP bill would present three major changes to the employee benefits broker-reporting structure:
- The timing: Compensation disclosures would be made before placement of the coverage.
- Universal application: The disclosures would apply to all plans, not just 100+ employee companies.
- The disclosures generally are more robust (i.e., must disclose any type of compensation, not just comp paid by the carriers).
Of course, for ERISA benefits plans, broker fees and commissions paid or reimbursed by insurers already are disclosed on Form 5500 (specifically, commissions and fees based, in whole or in part, on the value of the placed contracts/policies). The draft language appears to dramatically expand current ERISA disclosures by requiring:
- Providers of brokerage or consulting services (“covered service providers” – broadly defined) to group health plans;
- Who reasonably expect $1,000 or more in compensation, direct or indirect, in return for such services;
- To disclose to the plan fiduciary in writing:
- A description of services to be provided;
- If applicable, a statement that the service provider will provide, or reasonably expects to provide, services as a fiduciary;
- A description of all direct (in aggregate or by service) and indirect compensation the provider reasonably expects to receive;
- Descriptions of arrangements between covered service providers and payers of indirect compensation and identification of services for which the indirect compensation will be received;
- A description of any transaction-based compensation that will be paid to the provider (e.g., commissions, finder’s fees, incentive comp, etc.), along with the payers and the services for which the compensation is being paid;
- A description of any compensation the provider expects to receive for termination of the contract/arrangement and how prepaid amounts will be calculated and refunded;
- A description of the manner in which any of the above-referenced compensation will be received; and
- Upon the plan fiduciary’s request, any other information related to compensation.
“Compensation” includes anything of monetary value during the term of the contract or arrangement. “Direct compensation” is received directly from a covered plan; “indirect compensation” is from any source other than the covered plan, plan sponsor, covered service provider or an affiliate. Descriptions of compensation may be expressed as amounts, formulas, per-capita participant/beneficiary charges, or by other reasonable method (may be a reasonable good faith estimate if the broker cannot readily describe the compensation, but then must provide methodology and assumptions behind the estimate).
The disclosures described above must be made no later than the date that “is reasonable in advance of” execution of a contract/arrangement, extension or renewal. Changes to the information must be made within 60 days. Good faith errors and omissions in disclosures will not subject the broker to ERISA penalties if the provider promptly corrects any misinformation. Plan fiduciaries who discover that providers have not provided the above disclosures (if the error is left uncured) must terminate the contract. Finally, the draft would not preempt state laws governing broker/consultant disclosures.
Surprise Medical Billing
There are currently two other proposed bills aimed at kiboshing surprise medical bills for patients. Because there is bipartisan support on the issue, there will likely be movement on it this year. Based on responses to other major federal proposals to date, carriers are in favor of a reference-based pricing mechanism based on Medicare rates, while providers are opposed to Medicare-pegged rates and support arbitration.
Here’s what The Council of Employee Benefits Executives (CEBE) Advisory Committee discussed at its latest meeting at the end of May:
- A reference-based pricing (RBP) system tied to the in-network rate for the same services has the benefit of being already negotiated in contracts and would be relatively easier to administer.
- Any arbitration process should be limited in scope to addressing as few issues as possible to avoid an overly burdensome system.
- If out-of-network (OON) prices are capped or set, there is a danger that some will start selling OON-only plans. One solution may be to create an eligibility clause to receive the surprise billing relief.
- With respect to arbitration, self-insured employers have historically been disadvantaged due to long processes and tail risk with stop loss coverage expiring.
- In general, the legislation should be broad enough to cover various services and providers (e.g., lab work, specialty doctors, independent emergency room departments, etc.).