One of the most significant pieces of the CAA is that government agencies like the Department of Labor, the Department of Health and Human Services and the Treasury are going to hold the group health plan sponsor (aka, the employer) responsible as the fiduciary of the plan.

While the employer has always been a fiduciary for their benefits plan, the CAA legislation puts teeth (through enforcement) behind it.

So, what does it mean to be a fiduciary under Employee Retirement Income Security Act of 1974 (ERISA) and the Public Health Service Act (PHSA)?

While it may seem a bit complicated, here are the basics …

As a fiduciary, plan sponsors must:

• Prove they have a process that is working in the best interest of the participant and beneficiary
• Carry out duties prudently
• Follow the terms of the plan documents consistent with ERISA
• Hold any plan assets in a trust
• Pay only reasonable plan expenses

Fiduciaries who don't meet the basic standards of conduct as outlined in CAA may be personally liable to restore any losses to the plan, or to restore any profits made through improper use of the plan's assets.

In addition, fiduciaries may be subject to class action lawsuits similar those that occured in the retirement space when the Pension Protection Act of 2006 went into effect.

4 key areas of the CAA to understand

The CAA established specific requirements for plan sponsors to comply with as a fiduciary. These four areas include:

1. Removes gag clauses from service provider contracts on price and quality information
2. Establishes reporting requirements for prescriptions
3. Requires the disclosure of direct and indirect compensation from all service providers
4. Requires parity in substance abuse and mental health benefits

Removal of gag clauses

Section 201 of the CAA amends ERISA, PHSA and the Internal Revenue Code to make sure employer-sponsored health plans have access to certain cost and quality care information by service providers.

Service providers are defined health care providers, third-party administrators, networks or associations of providers, and others.

Historically, these gag orders have been outlined in insurance company contracts and have restricted the data that a plan sponsor receives and how they could use the data.

For example, in a contract with a 7,000 life client, the plan sponsor had to agree that if they ever left that specific BUCA, they would have to destroy their data. Think about the fact that you're now telling an ERISA fiduciary that when they leave that carrier, they have to destroy their own data. This is exactly why this law was put in place.

The contract in this example also prohibited using the data to compare the current carrier to another. It also prohibited the plan sponsor from comparing the hospitals that serve their employees or performing any site-of-care analysis that might be used to narrow a network.

All of those things and more are built into these ASO contracts. Many times, the employer doesn't even realize they're signing off on them and the advisor doesn't know they exist.

Now, group health plans may not agree to restrictions in their contracts that would prevent them from getting data and sharing it with participants on cost and quality of care information.

The prohibition of the gag clause is all about transparency in an effort to:

• Show that employee costs related to claims are expended in an efficient manner
• Provide enrollees with information to make informed, cost-effective health care decisions
• Share information with the plan sponsor to identify waste and develop strategies to reduce it

Action item: Closely review third-party administrator and other provider agreements for gag clauses, which must be removed.

Prescription drug disclosures

The CAA requires plan sponsors to report prescription drug information to the DOL, HHS and Treasury, including:

• Beginning and end dates of the plan year
• Number of plan participants and beneficiaries
• Each state in which the plan is offered
• The 50 brand prescription drugs most frequently dispensed, including number of paid claims for those drugs
• The 50 most costly prescription drugs by annual spend, including annual spend amount for those drugs
• The 50 prescription drugs with the greatest increase in plan expenditures
• Data on total health care spending
• Average monthly premium paid by employers and employees
• The impact on premiums of rebates coupons and other similar remuneration paid by drug manufacturers to the plan
• Any reductions in premiums and out-of-pocket costs associated with rebates, fees or other remuneration as described in the last bullet

One of the most significant changes is going to be the transparency and disclosure of rebates at a drug level.

Today, with the use of data, employers can find an additional 20% to 30% savings.  Based on the new reporting requirements, particularly looking at rebates on a drug level, there will be additional opportunities for savings.

Action item: Revise agreements with third-party administrators (TPAs) and pharmacy benefit managers to allow full access to claim information, rebates, fees and other forms of remuneration.

Compensation disclosures

The CAA includes rules that require that service providers (including brokers and consultants) disclose the compensation they may receive to recommend certain insurance carriers, benefits administrators and other vendors to plan sponsors/employers.

These disclosure requirements assist the plan sponsor in determining if the compensation arrangement is "reasonable."

The new rules apply to contracts where the service provider expects to receive $1,000 or more in direct or indirect compensation in relation to brokerage or consulting services on group health plans.

The CAA establishes that plan sponsors can immediately terminate contracts with providers that fail to disclose this compensation.  

Action item: Identify and review all service provider agreements, and begin discussions with service providers on when they will meet disclosure requirements. 

Mental health and substance abuse benefits

The CAA creates new requirements for group health plans to ensure compliance with the Mental Health Parity and Addiction Equity Act (MHPAEA). The MHPAEA prohibits group health plans that offer mental health and substance abuse benefits from giving less favorable terms and conditions than for medical and surgical benefits.

Group health plans and issuers are now required to formally analyze and document their compliance, and make this available to the regulator of the plan. Regulators are required to request no less than 20 comparative analyses per year.

Action items: Ensure the group health plan has a vendor that will provide this comparative analysis, and be prepared to respond to a request for documentation.

Practical next steps for benefits brokers

First, make sure that your clients and prospects are aware of the changes that the CAA brings. Brokers have a great opportunity to attract more business and retain clients if they educate and prepare their clients to comply with CAA.

Some practical next steps for you, the broker, are:

• Make sure clients acknowledge they are the fiduciary for their health care program
• Help clients establish a compliance fiduciary procurement process and educate them on their roles and responsibilities as a fiduciary
• Ensure clients are prepared to identify and eliminate gag orders in their TPA/insurance agreements by the end of the year
• Identify the various regulatory reporting requirements of the CAA, specifically prescription drugs
• Determine how you will calculate and report both your direct and indirect compensation

Explain to clients they need their own data to fully comply with CAA regulations, and help them access and store their data

Hugh O'Toole is the CEO of Innovu.

Gordon Zellers is a partner and advisor at  InCite Performance Group.