By Cynthia Stamer
While most employers and insurers of employment-based group health plans view with great concern radically expanded health plan responsibilities taking effect in 2014, many are failing to take steps critical to manage exposures and costs already arising from the Affordable Care Act (ACA) and other federal health plan regulations.
For most health plans, these steps should include the following:
1. Know The Cast Of Characters & What Hat(s) They Wear
Employers rely upon many vendors, advisors and assumptions when making plan design and risk management decisions. Employers and management can assume significant risk because of misperceptions about these allocations of duties and operational and legal accountability.
Knowing what everyone’s roles and responsibilities are is a critical first step to properly understand and manage health plan responsibilities and related risks.
Under the Employee Retirement Income Security Act (ERISA), parties that exercise discretion or control over health plan administration, funds or certain other matters are considered “fiduciaries.” Fiduciaries generally bear personal liability for administering their health plan related responsibilities. Failing to identify and manage the fiduciaries causes sponsors or their management to take on unnecessary, unrecognized liability, or fail to manage other risks and compliance responsibilities.
The rules affecting health plans have undergone continuous changes. Many health insurers and plan service providers have not updated their knowledge, documents or practices. Employers and plan fiduciaries that mistakenly assume vendor policies and documents are compliant typically will pay liabilities resulting from these omissions. Proper understanding of the rules and their implications is critical to understand and manage the applicable risks and exposures.
3. Review and Update Health Plan Documents to Meet Requirements and Manage Exposure
Timely updating of plan documents has never been more critical. Failing to update those documents can unleash a host of exposures. Among other things, noncompliant plans expose employers to excise tax penalties and the plan to lawsuits, administrative enforcement and sanctions. For example, COBRA, HIPAA, and GINA violations typically carry excise tax liability of $100 per day per individual affected.
The devil is in the details. Not only must the documentation meet all technical mandates, the language, its clarity and specificity, in the plan document must match the actual processes that will be used to administer the plan.
4. Update the Plan For Changing Compliance Requirements and Enhanced Defensibility
Proper health plan language is critical. Unfortunately, most plan sponsors need to substantially strengthen their plan language. Outdated or other sloppy plan language exposes employers to excise tax penalties. Court precedent shows inadequate drafting of plan terms frequently undermines the defensibility of claims and appeals determinations, exposes plans and fiduciaries to penalties or unnecessary lawsuits, and drives up plan administration and benefit costs.
5. Consistency Matters: Build Good Plan Design, Documentation and Processes, and Follow Them
Defensible health plan administration starts with building and adopting strong terms and processes that are carefully documented and communicated in a legally compliant manner. Good documentation and design on the front end should minimize ambiguities in the meaning of the plan and who is responsible for doing what when. With these tools in place, delays and other hiccups that result from confusion about plan terms should be minimized and more easily resolved by timely, appropriate action by the proper responsible party.
6. Ensure the Correct Party Carefully Communicates About Coverage and Claims in a Compliant, Timely, Prudent, Provable Manner
Ideally, the party appointed to act as the fiduciary for purposes of carrying out a particular function also should conduct all communications and negate responsibility or authority of others. For instance, allowing unauthorized parties to perform plan functions is less likely to promote enforceability. Furthermore, the likelihood that the communication or other activity will not comply with the fiduciary responsibility regarding the plan is significantly increased when a party who has not been appointed as a named fiduciary undertakes to speak or act.
7. Prepare For ACA’s Expanded Data Gathering and Reporting Requirements
Health plans are already required to collect a broad range of personal and other sensitive information about employees, dependents, and others. While employers and their health plans historically have collected and retained the names, place of residence, social security number, and other similar information about employees and their dependents, plans also sometimes need employee earnings, company ownership, employment status, family income, family, medical, military, and school leave information, divorce and child custody, enrollment in Medicare, Medicaid and other coverage, and a broad range of other additional information for plan administration or compliance.
In 2014, plans also will need total family income, cultural and language affiliations, and other data to meet ACA reporting mandates. To mitigate potential discrimination, privacy and other risks inherent in the sensitive nature of the data, health plans and sponsoring employers must plan to collect needed information with appropriate safeguards to prevent its improper use, access or disclosure.
8. Select, Contract and Manage Vendors With Care
Health plan sponsors typically hire and rely upon vendors and advisors to design and administer their health plans. Credential, select and contract carefully with vendors. Since vendor selection and oversight usually is fiduciary action, companies or management choosing vendors must verify credentials, bonding and other qualifications necessary to demonstrate the prudence of the vendor involvement.
Careful contracting also is critical. While many vendors claim extraordinary knowledge and service, their contracts assign liability to the plan sponsor or management as plan fiduciaries. In addition to including the required business associate agreement provisions, precisely document all credentials and service and quality commitments and provide for appropriate indemnification, bonding and liability insurance.
9. Help Plan Members Build Their Health Care Coping Skills With Training and Supportive Tools
Whether the company plans to continue to sponsor employee health coverage after 2014, training and tools that help employees and their families understand and manage their health and their benefits can pay big dividends. Beyond the costs of caring for a serious illness or injury, productivity also suffers while employees deal with family illness. Wellness programs that encourage the efforts of employees and their families to stay healthy may be one valuable component of these efforts.
10. Pack The Parachute and Locate The Nearest Exit Doors
With the expenses and liabilities associated with health plans, businesses also should develop strategies to soften the landing in case their health plan experiences a legal or operational disaster.
Require vendors to provide appropriate indemnification and accountability in contracts. Keep documentation about advice, assurances and other relevant evidence received from vendors, which could be useful in showing the company’s or plan’s efforts to provide for the proper administration of the plan. When concerns arise, investigate and redress concerns in a timely, measured fashion that documents the prudent response to the concern by the named fiduciary parties. Buy fiduciary liability insurance to help pay for potential defense costs.
11. Get Moving On Compliance and Risk Management Issues
Since many compliance deadlines already have passed and the impending deadlines allow limited time to finish arrangements, businesses, fiduciaries and their service providers need to move immediately to update their health plans to meet existing and impending compliance and risk management risks under the ACA and other federal laws, decisions and regulations.
12. Provide Input On Affordable Care Act Rules
While the Supreme Court recently upheld the constitutionality of the ACA’s individual mandates, many opportunities to shape its mandates remain. Congress continues to debate reforms or repeal. Regulatory interpretations continue to shape the requirements and costs of the ACA. Businesses must stay involved and alert. Zealously monitor new developments and share timely input with Congress and regulators about rules that present concerns before they become fully implemented.
Cynthia Stamer is a board certified labor and employment attorney with more than 24 years of experience in employee benefit, human resources, and health care matters. She practices in Plano.