CAA 2021 Provisions Require Employers Take a Closer Look at Employee Benefits Costs

Passed by Congress on December 21, 2020, the Consolidated Appropriations Act of 2021 (CAA) is about improving transparency and accountability of the healthcare marketplace. When we look inside the CAA it contains machine-readable file reporting, Rx DC, fee disclosure and gag clause removal. As health plan fiduciaries, employers bear the burden of enforcing these protections. Yet because most brokers haven’t proactively discussed the CAA provisions, most employers have remained unaware. That will soon have to change: The deadline for compliance is December 31, 2023.

We recently sat down with Patrick Williams, Accredited Investment Fiduciary (AIF) with Fiduciary in a Box, to get his insights into these requirements, what they mean, and what could and should occur as a result.

Patrick, can you tell us about CAA2021 Fiduciary Fee Disclosure Requirements? What do they mean for employers?

Employers are operating in a new regulatory environment. Transparency in the healthcare industry is changing – what used to be a black box is no longer a secret to the public. This is being driven by regulations resulting from the Hospital Price Transparency Act, the No Surprises Act, and the Consolidated Appropriations Act of 2021.

Employers have always been the plan fiduciary, which ERISA defines as “a person or entity with the discretionary authority to control and manage the operation and administration of a benefit plan covered by the Employee Retirement Income Security Act.” Prior to the CAA 2021, nobody was closely monitoring or enforcing things – but now, the requirement has teeth. There are penalties where there previously weren’t any.

As fiduciaries, employers will have to be able to demonstrate they’ve done necessary due diligence when it comes to health plans, making decisions on behalf of participants – more specifically, on what’s best for their employees. It may sound burdensome, but the aim of the CAA is ultimately to empower employees to become better consumers of healthcare. Transparency in coverage is a necessary step on the way toward an educated public. Compensation disclosures by all covered service providers are required, a review for “reasonableness” and how to file attestations, those FAQs are available here.

We understand there’s a looming deadline (12/31/23) by when employers must adhere to this legislation. What does this mean for them?

Employers will have to attest to the removal of gag clauses, which are typically found in administrative services agreements (the contracts associated with TPAs and insurance companies). Earlier this year, the Centers for Medicare & Medicaid Services, a federal agency within the U.S. Department of Health & Human Services, released a 3-page FAQ sheet describing the guidance of gag clauses, and where and how to file attestations. Those FAQs are available here.

While attestation should not be a big issue for employers, it will be a challenge for many, considering both the timing and the fact that many employers are unaware of the law. As such, more employers are looking to their brokers and consultants to help them stay compliant, especially regarding employee benefits. When legislation like this is passed, employers need to pay attention to what they’re spending broadly across benefits.

From a disclosure standpoint, many brokers were slow in terms of developing and disseminating information (compensation and services) to employers, which is something we also saw with retirement plans. Recordkeeping in retirement used to be 3% of assets; now, it’s less than half a percent. We’ve seen compression in fees and compensation there; now we’re going to get compression in employee benefits, which will result in better due diligence, and ideally create more informed purchasers of healthcare.

What needs to happen as a result?

Employers will have to establish a prudent process, create transparency and accountability. They will need to know what their healthcare costs are – and not just premiums, but all other associated costs as well. For those employers with fully insured plans, it’ll be more a review of the compensation and services their broker is delivering to them. Employers need to become better buyers of healthcare. Historically, they haven’t always asked brokers the right questions. This will hopefully fix that.

What’s also important to understand is “employer law not TPA or broker law”, that this attestation will be a mandatory annual filing, requiring employers to evaluate all of the healthcare providers in their ecosystem. Moreover, employers don’t just have to file, they also have to determine reasonableness – in other words, benchmark.

Employers need to be better buyers of healthcare. And TPAs must educate brokers on what they can do and how they can grow their business.

The bottom line is that we want to eliminate waste in healthcare, and that is done through transparency and disclosure. Price and quality are now at the employer’s fingertips. While it may seem like a daunting change to adapt to, it doesn’t have to be. Ultimately, this is great news for employers, as well as brokers, that want to take advantage of this opportunity.

For benefits administrators, it’s a perfect chance to differentiate. Show your broker partners and employer clients your value by sharing your CAA knowledge, guiding them through the requirements, and helping them stay ahead of the December deadline.

View a recording of our webinar, What You and Your Clients Need to Know, for more information from Patrick on this topic.