An important part of my business between 2010 and 2017 was pension advisory. The role of an advisor to plan sponsors was evolving as regulatory reforms were placing employers under higher scrutiny as ERISA fiduciaries. Questions that retirement services professionals had to consider included:
- “What should our process look like for investment selection and monitoring?”
- “In what way(s) should I be providing participants with education? Advice?”
- “Which advisor is best positioned to help me and my plan participants?”
- “Should the channel of the advisor matter? (Investment Advisor vs Broker-Dealer)”
- “Do fiduciary services fit our needs? If so, under ERISA 3(16), 3(21), and/or 3(38)?”
- “What advisor fee structure is reasonable for a given value proposition?”
An important aspect of our practice in those days was the ERISA 408(b)(2) disclosure to plan sponsors by ERISA “covered service providers.” While some of our competitors in the industry viewed this collection of regulatory reforms as a threat, we took a positive approach and implemented both the letter and spirit of these reforms as fast as possible. My view is that the reforms were focused on creating fee transparency for plan sponsors and participants and limiting conflicts of interest. My opinion was that these are precisely the types of goals we should want our regulators to pursue!
I often wondered whether, at some point, future regulations would similarly focus on health plans and the opaque underlying cost structures (e.g. around the prescription drug value chain, hospital marketplace) and conflicts of interest in distribution. The subtle impact of such conflicts are captured nicely in this quote:
The effect of such financial incentives is troubling, said Michael Thompson, president of the National Alliance of Healthcare Purchaser Coalitions, which represents groups of employers who provide benefits. He said brokers don’t typically undermine their clients in a blatant way, but their own financial interests can create a “cozy relationship” that may make them wary of “stirring the pot.”
Employers should know how their brokers are paid, but health care is complex, so they are often not even aware of what they should ask, Thompson said. Employers rely on brokers to be a “trusted adviser,” he added. “Sometimes that trust is warranted and sometimes it’s not.”
Source: https://www.propublica.org/article/health-insurance-brokers-cost-commissions-bonuses
The time has come for focus on health plans under the provisions of Consolidated Appropriations Act (CAA) 2021. CAA’s impact is far reaching, including a ban on surprise medical billing effective 1/1/22, removal of gag clauses effective 12/27/20, and broker disclosure rules effective 12/27/21. Employers, brokers, insurers, and consultants are all impacted by this new regime.
When you consider the simultaneous effects of CAA and nascent focus on reform of hospital services through transparency rules and emerging solutions from both for-profit ventures (e.g. Turquoise Health and Innovu) and non-profit organizations (e.g. NASHP), consultants and employers are increasingly positioned to “pull back the curtain” on the underlying costs of health benefits. It is an exciting time!
I attended an event last week which stood out as particularly novel.
Sage Transparency
The Employers’ Forum of Indiana hosted this informative event, featuring national leaders in healthcare research from Rand, Arnold Ventures, Johns Hopkins, NASHP, NAHPC, among others. The motivation for the event was articulated in the materials as, “[A] free market for healthcare only works when purchasers have a choice.” Amen.
In addition to sharing updated research from Rand, Sage Transparency was revealed. This new publicly-available dashboard draws price data from Rand 4.0, commercial breakeven data from NASHP, quality measures from CMS, and various supplemental data from private providers (e.g. Turquoise Health and Healthcare Bluebook.) It is awesome.
The insights supported by this platform are interesting and, in conjunction with plan sponsor and payer priorities, quite useful. The data can expand to big-picture and strategic matters like relative costs at state levels to narrow and focused matters like hospital-specific payor-mix and commercial break-even levels.
I’m excited to see how this tool will continue to evolve. I took tons of notes and see that Rand 4.0 will be drawing in additional data regarding Ambulatory Surgical Centers (ASC) and additional quality measures and provider-specific negotiated prices will also be drawn into the dashboards.
Some concluding thoughts
Chris Whaley from Rand provided a succinct and compelling update on “Rand 4.0 Hospital Price Transparency Study: What Employers Pay.” Included in his initial remarks was the following quote:
Fiduciaries have a responsibility to “act solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them.”
Department of Labor
His follow-up comment appropriately previewed the “so what” of the Sage Transparency tool. “How can self-funded plans fulfill fiduciary obligations without knowing prices?” Indeed.
The ability of employers, in partnership with leading and independent consultants, to reduce costs in health and welfare plans has never been better. It seems clear to me that transparency in 401k products led to improved costs for Americans who save through the workplace; I imagine American patients receiving insurance from the workplace will experience even greater benefit from efforts of firms like Innovu (specific to a firm’s own claims) and Sage Transparency (for system- and geographic- specific cuts) to enable strategies for improved healthcare costs moving forward.
History doesn’t repeat itself, but it often rhymes.
Mark Twain