Most employers have no idea whether they get value for the money they spend on health benefits. Employers rarely see data on the performance of health care providers, such as rates of infections or outcomes. Contracts with pharmacy benefits managers, health plans, and consultants often hide the real costs of services. Sometimes employers are even denied access to their own claims data (though they are never denied the obligation to pay those bills).
This drives employers crazy. So they lobbied for health care transparency, and succeeded three times this century. In 2005, the Bush Administration began requiring hospitals in the Medicare program to report on serious errors. In 2009, the Affordable Care Act, also known as Obamacare, required even more reporting on patient safety and quality.
Now comes the third major policy shift for transparency: the Consolidated Appropriations Act (CAA) of 2020. Unlike the earlier reforms that pivoted on the Medicare program, this one focuses on employers and other purchasers of health benefits, so-called “plan sponsors.” Surprisingly, many employers seem unaware of this major upheaval in the laws governing their health benefits programs.
The CAA has the rare distinction of support from both the Trump and Biden administrations, and both parties in Congress. The law puts employers more in the driver’s seat to enforce good value from providers and vendors, and forbids hidden contracting terms that disfavor employers and their employees. This sounds ideal, but in the short-term employers face daunting hurdles complying with the new regulations needed to put all this in place. “I feel a little like the dog that caught the car,” said one of the law’s leading employer champions, James Gelfand of the ERISA Industry Committee.
Compliance involves extensive new rules and responsibilities, including:
o Removal of gag clauses from service provider contracts, including health plans, third party administrators, consultants, brokers, pharmacy benefits managers, and any other entity involved in health benefits. No more withheld claims data other than privacy protected data.
o Reporting requirements for pharmacy and prescription drug prices.
o Disclosure of direct and indirect compensation from all service providers, so hidden incentive arrangements between brokers and plans or PBMs and drug companies must be fully accounted for.
o Parity between mental health and substance use disorder benefits and other health benefits. The CAA establishes a vastly more stringent requirement around parity than employers are accustomed to, including significantly enhanced documentation requirements.
Plan sponsors—and not third parties like health plans or consultants—must demonstrate to federal officials that the health benefits they offer are cost-effective, high-quality, and meet mental health parity and pharmacy benefit requirements. They must disclose it all to their employees.
In practice, employers and employees will become more aware of the full range of pricing and costs, including the hidden fees and incentive agreements among health care providers, vendors, service providers, and other middlemen. Employers should prepare themselves for a shock once they get a look at some of those numbers. They should also prepare for some tough vendor conversations.
Reporter: Leah Binder
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