by Barbara Zabawa
On December 27, 2020, in the midst of the COVID19 pandemic, Congress passed the Consolidated Appropriations Act of 2021 (CAA). The “No Surprises Act” was contained in that new law and took effect on January 1, 2022. The No Surprises Act attempts to accomplish a number of things, most notably requiring health plans to cover surprise emergency medical service bills and out-of-network medical services rendered at in-network hospitals and facilities at “in-network” rates. The impetus of this law was to address the all-too-common occurrence of people getting surprise medical bills when they visit the emergency room or hospital, not realizing that some of the providers involved with their care do not have an in-network contract with the patient’s insurance company. As a result, the patient gets a “surprise bill” from the out-of-network provider at a rate the patient was not expecting or can afford. You can read a good summary of the No Surprises Act provisions by the Kaiser Family Foundation here.
We, however, will focus on another provision in the CAA. Specifically, an amendment to ERISA, the federal law that governs most employer group health plans. The best overall guidance regarding this provision can be found in the Department of Labor’s Field Assistance Bulletin No. 2021-03. The new law is found in statutory section 29 USC § 1108(b)(2)(B). Here, we will draw from the DOL guidance and statute as it tries to explain if and how this provision applies to workplace wellness programs.
What is the New ERISA Amendment?
Generally speaking, the ERISA amendment requires insurance brokers and consultants to group health plans to disclose their direct and indirect compensation to the group health plan’s fiduciary, which is often the plan sponsor’s board of directors, LLC members, or partners. This new amendment takes effect for contracts signed on or after December 27, 2021. The statute includes as broker and consultant services “wellness services” and “wellness design and management services.” See 29 USC § 1108(b)(2)(B)(i)(I)(bb). Thus, if an insurance broker or consultant provides wellness services or wellness design and management services to a group health plan, the broker or consultant must disclose their compensation (both direct and indirect) to the plan’s fiduciary.
This disclosure requirement is likely to be triggered in the following situations:
- Referral Fees or Revenue Sharing Arrangements. An insurance broker contracts with a wellness services provider (maybe a large wellness vendor or perhaps a solo wellness practitioner) to deliver wellness services to the broker’s employer group health plan client. The contract between the broker and wellness services provider includes compensation from the provider to the broker, such as a sharing in revenue or a consulting fee to the broker from the wellness provider. Such compensation to the broker should be included in the report to the plan’s fiduciary.
- Wellness Program Consulting A group health plan hires a wellness provider, such as a coach, health educator or large wellness company, to consult on the design of its wellness program. The wellness provider advises on types of wellness activities, incentives, and other aspects of workplace wellness programming to maximize effectiveness of the program. The wellness provider should disclose its compensation from the plan to the plan’s fiduciaries.
- Workplace Wellness Program Service Delivery. A group health plan hires a wellness provider to actually deliver the workplace wellness program services. The provider offers health risk assessments, coaching services, lunch-n-learns and disease management services. The wellness provider should disclose to the plan’s fiduciaries how much it will get paid by the plan for these wellness-related services.
- Disease Management Services. A group health plan hires a healthcare provider to help manage chronic conditions of plan enrollees, such as those with diabetes or at risk for heart disease. The healthcare provider offers enrollees diet and exercise plans, as well as coaching services. The healthcare provider should disclose to the plan’s fiduciaries the compensation it expects to receive in exchange for delivering the disease management services.
- Workplace Wellness Compliance Services. A group health plan retains a brokerage or consulting firm to help ensure its plan is compliant with various laws and regulations. The broker or consultant should disclose to the plan’s fiduciaries the compensation it expects to receive in exchange for the compliance services.
Of course, these are just some examples of when the disclosure requirement will likely exist. These compensation disclosures to the plan fiduciary must occur before the broker or consultant enters into a contract or arrangement with the group health plan or subcontractor. Remember, indirect compensation disclosures only need to be made to the plan fiduciary if the broker or consultant is getting paid, not if the broker or consultant is paying a subcontractor for their expertise or service. But, if there is indirect compensation from the subcontractor to the broker or consultant, such as free products or services to the consultant, that indirect compensation should be disclosed to the plan fiduciary.
What is the Point of these Disclosures?
According to the DOL guidance, the “required disclosures are intended to provide the responsible plan fiduciary with sufficient information to assess the reasonableness of the compensation to be received and potential conflicts of interest that may exist as a result of a cover service provider receiving indirect compensation from sources other than the plan or the plan sponsor.” In plain English, this means that the government wants to make sure group health plans are spending money wisely.
Healthcare regulations are notorious for striving to ensure that monies paid for healthcare-related services are reasonable and necessary. This new ERISA amendment appears to act in that same spirit. Plan fiduciaries are tasked with ensuring group health plan dollars are spent for the benefit of the plan beneficiaries. Plan fiduciaries should not be allowing money to be spent to line the pockets of favored vendors. By requiring brokers and consultants to disclose both direct and indirect compensation arrangements, plan fiduciaries should have a better idea of how plan dollars are being spent.
When does this New ERISA Amendment NOT Apply?
This new disclosure requirement would NOT apply in situations when workplace wellness programs are not contracting with a group health plan and the wellness program itself does not constitute a group health plan. The law amends ERISA, which applies to group health plans, not employers. Many workplace wellness programs are offered by employers to all their employees, not just to employees enrolled in the employer’s group health plan. So, if you are a wellness provider contracting with an employer and not the employer’s group health plan, you may not have to worry about this new disclosure requirement.
However, wellness programs can sometimes be their own group health plan. It depends on the types of wellness services the workplace wellness program offers. Wellness services that qualify as “medical care,” such as disease management programs or other activities intended to relieve or alleviate specific health problems, could qualify as a group health plan in its own right. In that case, one could argue that the wellness provider is technically contracting with a group health plan, not an employer. But, if the wellness activities were merely for improving the general health of an individual and not related to a specific health or medical problem, one could make a good argument that this new disclosure requirement does not apply.
Of course, as with all new laws, a lot has yet to be learned, and as this new law rolls out more guidance may occur. Until then, those brokers and consultants who contract with group health plans should start making plans to disclose compensation arrangements to the plan fiduciaries. Those wellness providers who contract with employers to deliver wellness services that are not tied to a group health plan should confirm whether the new law applies to them.
Barbara is the founder and President of the Center for Health and Wellness Law, LLC, a law firm dedicated to improving legal access and compliance for the health and wellness industries. She is also lead author of the book Rule the Rules on Workplace Wellness Programs, published by the American Bar Association.
