As Health Care Regs Tighten, Retirement Advisers May Have a Role

Thanks to regulation passed in 2021, experts believe the health care industry may be started down a path of fiduciary regulation and fee transparency similar to the retirement sector. But as aggregation across insurance, retirement and health benefits has brought workplace benefits practices closer together, retirement plan advisers may have a role to play, according to some in the industry.

Plan adviser Jamie Greenleaf has already been active in bridging retirement and health. The senior vice president at OneDigital Retirement + Wealth has implemented a collaborative model to the employee benefits aggregator since new health care regulations passed on December 27, 2020, as part of the Consolidated Appropriations Act of 2021.

Greenleaf says that, although she grew up in the retirement industry—literally: her mother worked in the 401(k) business—she has long been interested in health care’s importance for plan sponsors as “the second largest line item on a P&L after salary.” She sees CAA ’21 as an opportunity for the retirement industry’s experience to transfer to health care and ultimately improve outcomes.

“We’ve opened this Pandora’s box of opportunity,” she says. “When you apply a fiduciary standard to a retirement program, the costs are controlled and the outcomes are better. … That is the direction we can take health care.”

Before CAA ’21, employers “lived in a black box” when it came to their health care providers and the brokers that dealt with them, according to Greenleaf. Regulations laid out in Division BB of the 5,000-page act require health care providers to share participant data with plan sponsors so they can better analyze services and fees for their employees. The regulations also call on health care benefit brokers and consultants, who are often paid by providers, to disclose those fees to plan sponsors. That information may guide employers toward cost savings for their plans and participants.

“Employers can use those savings to improve benefits, increase salaries and hire more people,” Greenleaf says. They might also boost retirement saving outcomes by “making higher matching contributions or making contributions to an HSA. … That’s where the retirement connection really comes through.”

Education Needed

As of now, Greenleaf estimates that only 10% of plan sponsors are aware of CAA ‘21, “and that’s being generous.” That’s in part because the health care industry is not crowing about it.

“The health care industry isn’t talking about this because of the compression of compensation and increase in services that need to be delivered,” she says. “The problem is that the employers are on the hook; they are the fiduciaries on the plans.”

Hugh O’Toole, CEO of Innovu LLC, a benefits consultancy that offers services related to CAA ’21 to plan sponsors, guesses that “maybe 5% of employers in America have even started the conversation” about how to react to the regulation.

The CEO, who comes from leadership positions in retirement and workplace benefits, is a champion of the retirement industry engaging closely with CAA ’21. In his view, there is an entire industry of experts who have been there and done it.

“There is a potential opportunity because retirement advisers didn’t know how to do this in ‘06 either,” O’Toole says. “Now they are well-versed.”

Seeking Clarity

Even plan sponsors that are tracking CAA ’21 could use more clarity on the regulation, according to Melissa Bartlett, senior vice president of health policy with the ERISA Industry Committee.

“While I think employers appreciate what was done in the CAA, there are still a lot of questions on whether the reporting and transparency has moved the needle,” she says.

One area Bartlett points to is the ending of the “gag clause,” by which health care providers barred participant information from plan sponsors. As of the end of 2023, providers will need to show they no longer have any gag clauses in contracts with plan sponsors. But Bartlett says making plan sponsors responsible for getting that participant information from providers—information providers may not be actively offering up—has made sponsors nervous about year-end attestations they have to file with regulators.

“How do you attest to something that you don’t have information for?” she asks. “What about when a plan sponsor no longer has a contract with that [third party administrator]? How do they get the information?”

Bartlett also points to Section 202 of the rules that require plan sponsors to monitor and benchmark the fees their benefits consultants and brokers are receiving. There again, it is up to the brokers to disclose the fee structure and up to the plan sponsor to evaluate it, she notes.

Adding to the complexity, it is unclear who qualifies as a broker. Providers such as pharmacy benefits managers, for instance, may be getting associated fees from providers but not feel required to disclose them. The Washington-based ERISA Industry Committee has supported a movement in Congress for further regulatory clarity on Section 202, Bartlett says.

“We are at this crossroads now in terms of what comes next to make meaningful transparency happen,” Bartlett says. “Transparency for transparency’s sake is not enough; if it’s not meaningful transparency, and accessible and usable for employers, it’s just information that is out there.”

Call a Friend

When Craig Reid, president of retirement and wealth at aggregator Marsh McLennan Agency, first got wind of CAA ’21, he immediately connected with his peer on the benefits side of the business. Reid says cross-pollination between the benefits and retirement side happens frequently at the Marsh-owned agency, and CAA ’21 “accelerated” those conversations.

One particular area on which the retirement side weighed in was broker compensation, says Reid, which is a “big number” when it comes to the health care industry.

“That’s a new piece to the group health side,” he said. “But on the retirement side, we have been dealing with that conversation for over 15 years. So we’re working with our partners to help them understand how to have those conversations [with plan sponsors] better.”

Those discussions helped lead to Marsh McLennan Agency’s health team giving plan sponsors a broker compensation disclosure form. The practice helps clients understand exactly what the team is getting paid, Reid says. But that doesn’t mean the work is done, he says, with many regulatory questions outstanding as to who is the fiduciary on the healthcare benefits side, and who might be subject to litigation.

“Much like the retirement industry has changed over the past few years [due to litigation], how does that concept play out on the benefits side, knowing those dollars have more zeroes?” Reid asks.