Key Action Items for Employers in Response to the Consolidated Appropriations Act, 2021
Contributed By: Shannon Goff Kukulka, Employee Benefits Attorney at Waller
Employers, plan sponsors, and insurers are grappling with new reporting and disclosure rules and complex transparency requirements under the Consolidated Appropriations Act, 2021 (CAA) and are preparing for important compliance deadlines for their group health plans and coverage. Below are several takeaways for employers to better understand their responsibilities under the law and key strategies for next steps in order to avoid potential enforcement actions.
The CAA amends the Employee Retirement Income Security Act (ERISA), the Public Health Service Act (PHSA), and the Internal Revenue Code (the Code) to ban clauses in contracts between providers and plans that restrict access to specific cost or quality of care information or that interfere with plan sponsors’ access to de-identified claims data. The law also requires that group health plans and insurers attest to their compliance with these “gag rule” requirements by the end of 2022, and annually thereafter.
- Employers should review services agreements with third party service providers to confirm compliance and ongoing data access, consistent with the Health Insurance Portability and Accountability Act (HIPAA).
- Employers should confirm whether third party administrators or carriers will provide the forms or information necessary for making the required CAA attestations.
- Fiduciaries should ensure record retention policies reflect ERISA requirements and current best practices.
Transparency in Coverage
For plan years beginning on or after January 1, 2022, group health plans must post “machine-readable” (digital) information to a public website regarding in-network rates, out-of-network allowed amounts and billed charges, and prescription drug negotiated rates and historical prices. Plans must update the information required in this Phase One of transparency in coverage on a monthly basis.
- Employers should work with insurers, third party administrators, and pharmacy benefit managers to determine whether machine-readable files will be provided through their websites, and how this pricing information will be updated as required under the CAA.
- Employers that sponsor self-funded plans should determine how machine-readable files will be made available on the plan sponsors’ own public sites and/or consider the feasibility and security of TPA-created plan sites to facilitate access to the required pricing information.
- Companies should prepare for expanded pricing transparency requirements to become effective in Phase Two in 2023 (consumer price transparency tool providing searchable information on 500 specified services) and Phase Three in 2024 (extending Phase Two to all services).
Pharmacy Benefits and Drug Costs
The CAA creates new complex reporting requirements for group health plans related to prescription drug costs, including total spending on health care services itemized into specific categories and types; the change in amounts spent by the plan during the year for each of the top 50 most expensive prescription drugs; and the impact on premiums by rebates and fees paid by drug manufacturers to the plan or its service providers.
- Plans must submit their initial reports regarding 2020 and 2021 pharmacy benefits and drug costs to the Departments of Health and Human Services (HHS), Labor and Treasury by December 27, 2022 (and annually thereafter, no later than June 1).
- Employers that sponsor fully insured group health plans should confirm that their carriers or pharmacy benefit managers are completing the reports for a timely submission.
- Employers with self-funded plans should work with third party administrators and/or pharmacy benefit managers to confirm the scope of data reporting, capabilities and support that will be provided related to fulfilling the reporting requirements.
The CAA creates new requirements for brokers and consultants who contract with a group health plan and reasonably expect to receive direct or indirect compensation in excess of $1,000 (“covered service providers,” or CSPs). A CSP is required to make certain disclosures to the plan fiduciary, including descriptions of the provided services and expected direct or indirect compensation, so that the fiduciary can determine whether the arrangements and fees are “reasonable” under the standards of ERISA. If a fiduciary does not request the disclosures and/or the CSP fails to provide them, the contract would violate ERISA’s prohibited transaction provisions and subject the parties to potential penalties.
- Plan fiduciaries must obtain the required information from CSPs prior to entering or renewing a contract for brokerage or consulting services.
- Employers and plan sponsors should confirm they understand and can determine whether compensation paid to CSPs is reasonable.
- Employers and plan sponsors should consider updating fiduciary training and protocols for determining the reasonableness of services and fees related to their plans.
Mental Health Parity
Under the Mental Health Parity and Addiction Equity Act (MHPAEA), if a group health plan covers mental health/substance abuse and addiction benefits in addition to medical/surgical benefits, parity with respect to treatment limitations among the types if benefits is required. The CAA adds two new requirements to health plans’ existing MHPAEA obligations: (1) conducting a comparative analysis of nonquantitative treatment limitations (NQTLs) and (2) a duty to disclose this analysis upon request to federal agencies. If the Secretaries of Labor, HHS and Treasury find that a plan is noncompliant with MHPAEA, the plan must implement prescriptive corrective action within 45 days or notify plan participants of its noncompliance.
- Employers sponsoring fully insured group health plans should request information confirming that the carrier’s plan designs and processes are parity-compliant.
- Employers with self-funded plans should request more information about specific support that will be provided, or is available, in satisfying MHPAEA and performing CAA analyses.
- All plan sponsors should request the process document responsive to Section 203 of the CAA related to NQTLs and the required comparative analysis.
No Surprises Act
The No Surprises Act, part of the CAA, aims to address the persistent problem of balance billing patients who received emergency medical care and related services at out-of-network facilities, often with no prior notice. Providers must work with group health plans or insurers to determine the appropriate amount owed, under the methodology provided in the CAA. If the parties cannot reach an agreement on final payment beyond allowable patient cost sharing for certain out-of-network care, the CAA requires the parties follow the federal arbitration process.
- Employers should review plan documents to determine whether revision is necessary to reflect new requirements and confirm compliance by carriers or third party administrators.
- Review a more detailed discussion of the No Surprises Act requirements at http://communications.wallerlaw.com/surprise-billing-white-paper.
Notably, President Biden’s recently released FY 2023 budget includes new and drastically increased funds for heightened CAA enforcement in many of the areas discussed above. Against this landscape, employers, plan sponsors, and insurers must work together to fulfill their increased and continuing compliance obligations under CAA.
Get More Practical Tips
For more compliance strategies, practical tips, and next steps in managing increased compliance obligations under the CAA, check out this podcast episode with Nicole Belles (VP, Product at Springbuk) and Shannon Goff Kukulka (Employee Benefits Attorney at Waller). See this and other podcast episodes at springbuk.com/podcast.
The information provided here does not, and is not intended to, constitute legal advice but is for general informational purposes only.
Meet the Author: Shannon Goff Kukulka
Experience as in-house counsel for a Fortune 500 company, a master's degree in business, and roles in human resources and international law have provided Shannon Goff Kukulka special insight into complex employee benefits issues. Clients appreciate Shannon's in-depth legal knowledge, broad experience, and ability to develop creative, practical and cost-effective solutions to problems that may otherwise lead to penalties or litigation.