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SPBA submits comment letter to the House Committee on Education and the Workforce

 

March 15, 2024

SPBA submits comment letter to the House Committee on Education and the Workforce on a Request for Information:  ERISA's 50th Anniversary: Reform to Increase Affordability and Quality in Employer-Sponsored Health Coverage.

Below is the SPBA comment letter.

Thank you,

Anne Lennan
President

Comment Letter to the House Committee

March 15, 2024

The Honorable Virginia Foxx
Chairwoman
Committee on Education and the Workforce
2176 Rayburn House Office Building
Washington, DC  20515

Submitted electronically

Dear Chair Foxx:

The Society of Professional Benefit Administrators (SPBA) appreciates the opportunity to respond to the Committee’s Request for Information: ERISA’s 50th Anniversary: Reforms to Increase Affordability and Quality in Employer-Sponsored Health Coverage.

SPBA is a national trade association of Third Party Administration firms (TPAs) hired by employers and plans to manage their employee benefit plans.  It is estimated that 55% of U.S. workers and their dependents in non-federal health coverage are in plans administered by an SPBA member TPA.  TPAs operate much like independent CPA or law firms, providing professional claims and benefit plan administration for several client employers and benefit plans. SPBA member TPA firms started as entrepreneurial endeavors offering tailored benefit packages, education on government regulations, and excellent customer service to plan sponsors and plan participants.

SPBA has a broad and valuable perspective to offer.  The clients of TPA firms include every size and form of employment, including large and small employers, non-federal governmental plans, union, non-union, collectively bargained multiemployer plans (Taft-Hartley), as well as plans representing religious entities.  The majority of these clients are ERISA self-funded plans and sponsors; some of our TPA members also provide services to other types of plans, including fully-insured plans and HMOs. SPBA also has members who provide stop loss coverage to self-funded plans and other members who provide services that are essential to the professional performance of a TPA’s plan management function.

SPBA focuses on educating it members about the complex employee benefit government compliance requirements.  The members of SPBA receive compliance briefings from the federal agencies regulating the plans as well as from other industry experts.  Compliance is a priority for the members of SPBA.  

SPBA has a long history of engaging with the federal agencies (Departments of Labor, Health and Human Services, and Treasury) to explain how the wide array of plans operate and why some regulations pose significant challenges. The Departments have expressed appreciation for SPBA’s feedback over many years.

Preemption

ERISA established preemption principles that are essential to the operation of self-funded employer-sponsored plans.  Without ERISA preemption, multi-state self-funded plans would be almost impossible to operate with conflicting state-based rules. ERISA protects self-funded plans from state laws that would mandate benefit requirements, dictate plan designs, impose administrative burdens, and prevent employers from tailoring benefits to meet the needs of their respective workforces. ERISA has fostered innovative plan design, wellness programs, health care cost management, and improved the quality of care received by plan participants. 

SPBA applauds the goal of the Committee to strengthen ERISA preemption. 

Fiduciary Requirements       

ERISA currently has rigorous fiduciary standards to protect plan assets and ensure they are used prudently.  There is a high standard of care for what gets paid and how much is paid.  ERISA also has rigorous consequences for failure to fulfill fiduciary duties.  These include: personal liability to make the plan whole; the Department of Labor may bring suit and assess civil penalties or pursue criminal prosecution; the entity may be barred from being a fiduciary. 

According to the Department of Labor, ERISA has a functional definition of fiduciary that is not dependent on job title. Anyone performing ERISA fiduciary functions is a fiduciary under ERISA.  Persons or entities are ERISA fiduciaries to the extent they:

  • Have any discretionary authority or discretionary responsibility in the administration of the plan;
  • Exercise any discretionary authority or discretionary control regarding the management of an ERISA plan;
  • Exercise any authority or control respecting management or disposition of plan assets.

The standard of care requires more careful decision-making and more disclosure to plan participants than would be required in a normal business relationship.  The principal duties of ERISA fiduciaries of health plans are:

  • To act solely in the best interest of plan participants;
  • To use plan assets for the exclusive purpose of paying plan benefits or reasonable expenses of plan administration;
  • To act with the care, skill, prudence and diligence that a prudent person in similar circumstances would use;
  • To act in accordance with the documents governing the plan.

Most ERISA health plan sponsors delegate the day-to-day ministerial duties of plan operations to TPAs, insurance companies, or brokers.  The obligations these entities owe to the plan and plan sponsor are set forth in their contracts and determine the extent to which these entities assume fiduciary functions. Anyone with any degree of discretionary power over plan assets has the proportionate amount of fiduciary responsibility.  SPBA member TPAs understand the broad definition of ERISA fiduciary and their obligations to safeguard plan assets.  SPBA has a fiduciary training module in our ERISA Basics course for members.  

The current definition of ERISA fiduciary is broad and deep.  SPBA does not see a need for Congress to clarify or change the functional definition in existing law.  

The Department of Labor has an active outreach program to educate plan sponsors, TPAs, insurers and others who could be subject to ERISA fiduciary standards. SPBA was founded in 1975 and since then the DOL always has responded to our request for education by sending staff members to our annual meetings. The DOL also holds regional educational meetings across the US and maintains a user-friendly website with extensive compliance assistance.  We applaud the efforts of the DOL and express our gratitude for their dedication in helping our members understand all aspects of ERISA compliance since its passage.

Reporting Requirements

Over the last five years there has been a significant increase in reporting and documentation requirements for self-funded plans, including the Mental Health Parity and Addiction Equity Act, RxDC annual reporting, Gag Clause Attestations, air ambulance reports, and the Independent Dispute Resolution process. At the state level, self-funded plans are also seeing new data reporting requirements. These reporting requirements are cumbersome and administratively costly for plans.  

We applaud the Committee’s request for feedback on streamlining reporting and disclosure requirements. This is a vast topic, necessitating detailed review of each reporting obligation and careful consideration of how to streamline the requirements.  We kindly request a separate opportunity to offer feedback in this area.

Electronic Disclosure

Electronic disclosure holds the promise of reducing administrative costs for self-funded plans and SPBA member TPAs are interested in electronic disclosure when the interests of the plan and the plan participants are both served.  Delivery documentation of time-sensitive notices, such as a COBRA election notice, is critical to protect the plan from liability.  

The current safe harbor for electronic disclosure is challenging for health and welfare plans. Two categories of participants are eligible: 1) employees with the ability to access electronic disclosure at any location where they are reasonably expected to perform their employment duties and for whom access to the employer’s electronic information system is an integral part of those duties; 2) individuals who affirmatively consent to receive documents electronically. 

The 2020 Final Rule “Default Electronic Disclosure by Employee Pension Benefit Plans Under ERISA” provided two additional safe harbors for pension plans. SPBA supports these expanded options for electronic delivery of health plan disclosure. With these expanded options, plan sponsors and their service providers will exercise prudence in deciding when the electronic delivery option is appropriate.

Data Sharing

SPBA member TPAs are leaders in innovative cost management strategies and encourage their client employee benefit plan sponsors to embrace strategies that involve provider cost and quality of care information. Many TPAs assist plan sponsors in renting national insurer-created provider networks and there has been resistance from the national networks in sharing their provider cost information.  With the Transparency in Coverage disclosure requirement (Federal Register, November 12, 2020, Vol. 85, No. 219), the national networks have been more cooperative. SPBA has heard of varying resistance from regional networks.

SPBA is concerned about a growing tendency in legislation to impose reporting, disclosure, attestations, and similar responsibilities on entities who do not have access to the information.  We urge the Committee to recognize that not all entities have full access to the information that is required and these entities are being subjected to inappropriate liability.  Assumptions should not be made that all companies known by a general category, such as TPA, have access to the same information.  For example, independent TPAs, not operating in alliance with an insurer, lack easy access to network contract information.  TPAs that are a part of an insurer, commonly known as Administrative Services Only (ASO), have readily available access to such information.

In crafting future legislation, we urge the Committee to impose responsibility appropriately on those entities who create and hold the data, and not on those who only use portions of the data, but have no access to the underlying information that gives rise to the limited data used.

Gag Clause Attestation

The Gag Clause Attestation requirement poses a significant challenge to self-funded plans and TPAs. It appears the intent of this requirement was written with the fully insured marketplace in mind and not taking into account the major differences between the fully insured industry and that of the TPA and self-funded market.  The facts are explained below.

  • Self-funded TPA clients may not be able to attest since they do not contract with providers; the networks contract with providers.
  • TPAs may not be able to attest since they do not contract with providers; the networks contract with the providers and the TPA merely rents the network. Additionally, some self-funded/employer group TPA clients rent their own networks, thus the TPA has no contractual relationship with the network at all.
  • If a TPA is attesting on the behalf of their self-funded/employer group client that the client’s contracts meet the Gag Clause prohibitions, the TPA is attesting to ALL CONTRACTS FOR THAT CLIENT that are subject to the Gag Clause prohibitions. A TPA will not know the validity of all the contracts for their self-funded/employer group clients since, in many cases, the TPA has no contractual relationship with other entities used by their self-funded group clients (networks, PBMs, for example) that are subject to the Gag Clause prohibitions.
  • The self-funded/employer group itself might not have access to network contracts that are created by PPOs and PBMs.  The PPO networks and PBMs are the only entities that can actually fully and factually attest when working with a self-funded/employer group client. PPOs and PBMs refuse to attest for each individual client since they are not required to under the regulations.
  • if a TPA were to submit the required Gag Clause Attestation on behalf of the TPA’s self-funded plan/employer group clients, a TPA receiving a statement from the client that the client’s contract meets the Gag Clause requirements is not enough for a TPA to then turnaround and submit a formal attestation of compliance through HIOS.
  • The TPA industry is seeing numerous lawsuits ruling the TPA as being a responsible party in the case.  The courts are sending a clear message to the TPA industry that when a TPA acts on a client’s behalf, that TPA has assumed some level of accountability.  Basically, if bad actions occur, the TPA “should have known better” and the TPA is on the hook.
  • Because of the heightened risk when acting on a client’s behalf, in order for a TPA to adequately attest on behalf of a client for Gag Compliance (as noted above) that TPA must review all the relevant client contracts impacted by the regulation.  This must be done for each client. If problems are found where the TPA does not think the client’s contract language meets the needs of the regulation, the TPA must then notify the client of this issue and request the client to change the contract.  If the client disagrees or refuses, then the TPA cannot submit the attestation for that client, and, thus, the submission becomes the client’s responsibility.
  • There are clearly a number of problems that range from reopening a contract for edit, the scope of the contracts that must be reviewed which could involve parties that do business with the client but not with the TPA (network, PBM), and time and resources needed to do this contract review for each client.    

Recommendation – For the reasons set forth above, TPAs should not be included as an option to submit the Gag Clause Attestation on behalf of an employer group. 

Cybersecurity

The statutory and regulatory requirements under HIPAA, HITECH, and other federal and State laws are understood by plan sponsors and their service providers. There are numerous frameworks, standards and tools offering service providers assistance in crafting a cybersecurity strategy that is appropriate for their needs. The National Institute of Standards and Technology (NIST), the AICPA System and Organization Controls (SOC), the HHS HIPAA Security Risk Assessment Tool, as well as state cybersecurity standards provide helpful strategies.  These organizations adapt their guidelines as the threats change. SPBA member TPAs strive to adhere to the sound cybersecurity practices that are available. 

Cybersecurity has become a standard metric in evaluating service providers, such as TPAs. To retain and obtain new business, service providers must demonstrate cybersecurity safeguards.  Cybersecurity insurance is commonplace for TPAs and the insurer requirements for obtaining this kind of coverage are demanding.  The cybersecurity insurer offers another layer of oversight in the detailed application process that must be met before coverage is placed. Marketplace dynamics are strong motivating factors in keeping service providers focused on cybersecurity.

The Committee questions whether there are privacy gaps created by not defining a plan sponsor as a “covered entity” under HIPAA.  HIPAA was carefully crafted to provide protections to group health plans and individually identifiable health information.  If a group health plan is found to be in violation of HIPAA privacy, the plan sponsor of the group health plan is the responsible entity.  While not specifically named as “covered entities,” plan sponsors are subject to the HIPAA privacy and security rules.

The Committee asks if DOL should make explicit that acting prudently with regard to cybersecurity risks is a responsibility of fiduciaries of employer health plans.  The high standard of care set forth in the ERISA fiduciary rules is broad and is understood to encompass cybersecurity and any other threats that a person acting with care and skill would deem necessary. The fiduciary obligation includes existing, emerging and future challenges.   

There is sufficient guidance, enforcement and resources available to plan sponsors and service providers on cybersecurity.  Authorizing another agency to have cybersecurity oversight of group health plans and service providers will not be helpful. The organizations noted above have decades of experience in developing standards and will continue to lead the way in new approaches.   

SPBA sees an educational role for DOL in alerting plan sponsors to the cybersecurity resources available through other agencies and organizations.

Direct and Indirect Compensation

Compliance with the CAA requirement that brokers and consultants disclose direct or indirect compensation received for referrals to group health plan sponsors and individual market consumers appears to be limited.  It is our understanding there are varying interpretations of how the law applies. Clarifications are needed to achieve the objective of the disclosure requirement. 

COBRA and Portability

SPBA TPA members report a significant reduction in the utilization of COBRA since the availability of coverage through the Affordable Care Act Marketplace/Exchanges.  Those who elect COBRA usually have high medical expenses and place a disproportionate burden on self-funded plans.  To reduce the financial burden on self-funded plans, SPBA recommends reducing the length of COBRA coverage from the current lengths of 18 and 36 months to 3 and 12 months. Subsidies are available through the Marketplace/Exchanges to help lower the monthly premiums.   

The cost of COBRA premiums comes as a shock to many COBRA-eligible individuals as they have been shielded from the full cost of their health insurance while an employee.  The amounts that many employees pay (i.e., employee premium contribution, deductibles, copayments and coinsurance) represent a small amount of what the plan sponsor is paying for the coverage.  This shielding from the full cost of health care is the primary reason individuals do not function as self-advocating consumers when seeking planned health care services.

The affordability of COBRA coverage is tied to the larger issue of affordability of health care.  As noted in the report “Reforming America’s Healthcare System through Choice and Competition,” prepared by the Departments of HHS, Treasury, and Labor in 2018, consumers have an important role to play in controlling costs and must have meaningful information to create market forces that lower health care costs. 

Hospitals, insurers and group health plans are now required to publish pricing information for items and services.  The Transparency in Coverage requirements for group health plans and health insurance issuers were phased in and as of January 1, 2024, plans are required to provide pricing information for all items and services.  The technological costs to publish this information are considerable for group health plans and the costs become a part of offering a health plan to workers.

The vision for the transparency pricing tools to usher in a new era for health care shopping has not been realized as the rollout is still in its early stages.  We encourage the Committee to seek feedback from group health plans as the rollout continues and be open to ideas on how to improve the transparency requirements to facilitate usable and cost-effective tools. These tools, along with the hospital transparency information, hold the promise to lower health care costs, including COBRA costs.

Specialty Drug Coverage

High-cost specialty drugs pose formidable challenges for employer-sponsored group health plans. We appreciate the Committee’s grasp of this looming issue.

What challenges do employers face in offering coverage of high-cost specialty drugs, and how can those challenges be addressed?

Mid-sIze and small employers (under 1000 employees) are acutely vulnerable to specialty drug costs. In some cases, these expenses can constitute nearly 40% of total medical expenditure, a considerable increase from around 20% five years ago.

The issues confronting employers, as noted in the RFI, are the ability to afford these therapies via an employer sponsored plan.  In many instances, some employers are just one specialty claim away from being able to sustain coverage.

SPBA member TPAs are using clinical review as one strategy. Close to 50% of the newer specialty claims fall outside of the ambulatory PBM programs and are processed under the medical benefit by the TPA. This requires an evaluation of clinical and sourcing alternatives. Many medical providers are hesitant to transition away from overseeing the sourcing process, as doing so removes a specialty claim from a profit center whereas they mark-up the acquisition cost 100% of the actual cost.

A few strategies employed are:

PBM sourced specialty drugs (50% of specialty costs):

  • Negotiating a drug level pricing program for specialty drugs, including aggressive discounts.
  • Ensuring there is no conflict of interest in the fulfillment of specialty drugs, where the PBM either retains profits from the fulfillment or rebate shares. This can influence the approval and distribution of these specialty claims.
  • Independent clinical review.
  • Market leading rebates on eligible specialty claims to offset costs.
  • Ensuring there is copay assistance support for members offered by manufacturers.
  • Facilitating access to manufacturer charitable trusts to eliminate those expenses where members do not have adequate coverage and maintain a lower income level.

TPA processed specialty drugs (50% of specialty expenses) – infusion drugs where a PBM card is not feasible.

  • Ensuring that a PharmD professional, versus a non-pharmacist, reviews all high-cost specialty medications greater than $5,000 per year.
  • Summary plan document language that allows for such clinical review, as well as sourcing alternatives and movement of site of care where clinically appropriate.
  • Summary plan documents that create different coverage amounts, drug sourcing, centers of excellence, site of care and clinical review protocols for the multi-million-dollar gene therapies, similar to transplant coverages.
  • Large risk pool access for gene therapies to mitigate costs.
  • Employer captives to offset risk and lower stop loss premiums.
  • Drug warranty programs for a series of high-cost specialty claims, typically gene therapies, that allow for financial recoupment from the manufacturer should the drug “cure” fail.

What role can reinsurance models play in helping employers pay for high-cost specialty drugs? 

Allowing for employer access to Captive programs is a first step in spreading risk across multiple employers.  Assessing risk pool programs across large pools for Gene Therapy drugs and limiting “lasers” on specialty drug specific claims to mitigate employer risk would be helpful.

Some reinsurance models offer a funded risk pool where all employers attaching to their coverage contribute a small amount ($1 to $3 per employee per month), but coverage is limited to a very small number of the highest cost drugs.   We are not aware of models that provide for the specialty maintenance-type prescription drugs that range from $50,000 to $1,500,000 annually. Specialty management vendors can help in negotiating costs and obtaining drug company assistance for the patient based on income level. However, the fees associated with these programs reduce the employer savings.

Another strategy is to approach the drug manufacturer and structure a warranty protection program where the company would guarantee the efficacy of their drug and if it did not work for the patient, the plan would have the ability to subrogate to the warranty insurance and collect the payments they made in full or at some prescribed percentage. This is a limited strategy since it generally will only be available for the curative specialty drugs and gene therapies that are the costliest, and the definitions of success must be balanced to all parties for it to be beneficial to the employer plan and reinsurance markets. Further, portability comes into play where an employee who is cured of their disease leaves their employer and the warranty company has no ability to track the efficacy of the treatment and determine if a warranty claim is available 1-5 years down the road.    

What barriers exist in ERISA or elsewhere that hinder employers’ ability to leverage reinsurance for the purposes of mitigating the risks of covering high-cost specialty drugs?

The ability to negotiate directly with specialty drug manufacturers similar to other countries outside of the US, or to source specialty drugs through direct import from more favorably priced countries. We recognize sourcing from other countries comes with risk to the patient in validating efficacy of the specialty drugs and potentially reducing supply for the citizens of those countries. 

What tools can employers use to expand risk pools to lower the collective costs of coverage of high-cost specialty drugs?

There are gene therapy risk pools that employers can join for a per member per month fee. However, risk-sharing models are generally not large enough to bear risk over a long period of time especially with the pace of specialty drugs.

What role should the federal government play in assisting employers, drug manufacturers, and other entities to manage risks and to share the costs and savings of employer-sponsored coverage of high-cost specialty drugs? 

  • Consider a national specialty drug risk pool with a fee that allows the risk pool to break even on these medications. 
  • Allow for access to pricing secured under federal programs such as Medicare and Medicaid.
  • Allow for drug-reimportation of eligible specialty medications with countries that have qualified quality control.
  • Prohibiting medical providers from not allowing externally sourced and priced medications to be used for infusions to circumvent excessively high drug mark ups. This assumes external sourcing is from entities with accredited infusion drug distribution programs and proper “cold pack” distribution methods.
  • Alternatively, limit provider mark-up on medications that they source and ensure a transparent market driven procurement process.

What barriers exist in ERISA or elsewhere that prevent employers from entering into value-based arrangements with drug manufacturers for coverage of high-cost specialty drugs?

There are limited dollars thus far on value-based agreements between the manufacturer and PBM, less than 2% in relation to drug manufacturer rebates.  The value-based programs are anemic at best.

Likewise, on the TPA processed claims, there are limited manufacturer and drugs available for these programs (called warranty programs) and none on programs titled value-based contracting. Also, the recoupment significantly drops in outer years of a drug failure.

What innovative coverage models are currently in use that address the high cost of specialty drugs?

PBMs built programs that raised the copay of these specialty claims to secure the copay assistance dollars available from the manufacturer.  The savings would benefit both the member and the plan.  These programs delivered about 25% savings on average.  Several drug manufacturers sued the PBMs essentially killing these programs, stating that this was not the intent of these programs and employers were unduly benefiting from these programs intended to support patients only. 

Another valuable tool has been aggressive adoption of biosimilar drugs now available for certain specialty drugs.  Humira is a bellwether for the value of these programs with market involvement dropping the price by over 75%.   

SPBA welcomes the opportunity to discuss these issues with you and members of the Committee. Please contact Anne Lennan, SPBA President, anne@spbatpa.org, 301-718-7722.

Best Regards,

Anne Lennan
President

 

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