What seekers of benefit plan services should know.

Insights from Frederick D. Hunt - Active Past President

Society of Professional Benefit Administrators (SPBA)

The greatest risk & deterrent for employers offering employee benefits to their workers is not the fear of some huge medical bill. No, the biggest concern is compliance with the many laws, regulations, and requirements. It is a veritable alphabet soup of HIPAA (3 parts), COBRA, EDI, ADA, FMLA, MSP, VASP, QDRO, QMSCO, OBRA,, etc. etc. etc. for a few hundred more. Unfortunately, many of the laws carry draconian penalties, even for unknowing or unintentional oversights.

Every year, there are about 1,000 new laws, regulations, opinions, guidance, and major court cases impacting employee benefit plans. Many are legal responsibility of the employer (plan sponsor), not responsibilities of an insurance company or HMO. Not every one applies to every employer or plan, but someone knowledgeable needs to evaluate and make that decision. These requirements are issued by about 300 different government offices, and sometimes contradict requirements of other laws or requirements. Only about 1/3 of these requirements are adequately announced or discussed by even the specialized trade press, and only a very small percent of the requirements ever get final comprehensive guidance how to comply. Also, it is important to keep in mind that even if there is final comprehensive guidance, compliance must be evaluated and implemented on a case-by-case basis, so most insurance companies and others can only offer brief overviews.

So, THAT is the daunting situation employers face if they have an employee benefit health plan on their own. Just as more and more taxpayers feel unable to process their personal tax forms, and turn to professionals, the price of obeying the benefits laws has become the price to have professional expertise. I shouldn't complain, because it has spawned and consistently expanded the profession SPBA represents, Third Party Administrators (TPAs) who are hired to help design and then do day-to-day administration and government compliance analysis, advising & implementation. There are also thousands of attorneys & consultants who have become rich providing government compliance advice. As noted, most insurance companies and HMOs do not get into the nitty-gritty of specific government compliance for individual policy holders, because it would be extremely burdensome. That is not a criticism of their general approach. It is just understandable reality, because they offer a mass product.

Compliance with myriad government requirements is more integral to self-funded plans for the simple reason that self-funding is designed and operated per-employer or per group of employers (such as groups of employers who take advantage of the Taft-Hartley anti-trust act to combine all of their employees into a single plan with a union as centerpiece).

Obviously, for small and medium sized employers, this is a scary disincentive to offering health benefits at all. However, let me tell an anecdote about the impact on even the largest. Two of the biggest and most successful corporations in the country kept trying to join SPBA. I kept explaining that they were not eligible, because we only have Third Party Administration (TPA) firms. Finally, I had a discussion with a senior official of one of the firms and got a fascinating insight. The official of the huge company said to me, "Fred, we can't afford to keep up with the government compliance. Every time there is a new law or regulation or announcement; or we get some notice in the mail from a government office, we spend about $100,000 on lawyers, consultants and in-house staff time to figure out what it means, how will it apply, and are we the only ones. Meanwhile, even your smallest SPBA TPA firm or smallest client employer has probably been forewarned by you*, and has a nationwide network of peers to brainstorm the impacts and how it can best be handled for clients. " This mega employer was saying that even the largest richest corporations can no longer afford the kind of attention & care that needs to be taken. Sadly, what too often happens is that ignorance is bliss…until the employer or a worker is devastated by some law or rule they never knew or understood.

*The large employer's reference to SPBA giving member TPAs forewarning is because SPBA plays a close role with the government offices that write and interpret the requirements. Since SPBA members' clients cover every size, format, type, and location of employment, SPBA has a uniquely-broad perspective to share with the rule-makers. SPBA also has a firm policy of candor. Therefore, we usually know their intent and direction. Often, SPBA's value to the government is that we brainstorm ideas with the member TPAs to get real-world reaction of how something would work or potential problems to avoid.

Government compliance is an integral part of TPA thinking and relationship with the client. Just as a lawyer works closely with what you want in your will and how it will be administered, a TPA wants to work closely with you to be sure that the plan design & operation reflect the desires of the plan sponsor and participants (and not run afoul of the law). It is an ongoing interaction because of the many additions to the rules and also as new opportunities arise.

So, when considering who will handle your employee benefit plan, ask who will be at your side to give personalized service to help you through the pitfalls of the ever-growing jungle of government rules & requirements (and also opportunities). It is not intended to be "legal opinion", but government compliance expertise is priceless. So, when considering a firm for your benefit plan, always carefully demand to know where they get their government compliance information and precisely how do they get you into compliance. If the answer sounds hollow or glib, be careful. It's YOUR neck on the line.