Oh Oh, What Do We Do Now!

Looking Under The Hood – “The Oh Oh What Do We Do Now” Moment

Now that you know, and they know, you’re screwing your employees it’s time to understand that, whether you like it or not, you’re in the health insurance business. Poor oversight and bad decisions will not stand anymore……………….

After reading the following article, I thought of several large employers who are at risk, facing enormous legal liability should a plan member sue for breach of fiduciary duties. Experience dictates one can’t tell anyone they’ve screwed up without pissing them off. That would have the same effect as telling the girl at the customer service counter she’s so ugly a head transplant is her only salvation.

Chasing fire engines could turn out to be a new, exciting and profitable past time for idle benefit brokers and consultants. Lawyers are having way too much fun and it’s just not fair. Sharing is caring – Benefit brokers and idle consultants like having fun too.

The following article is a tutorial for aspiring ambulances chasers:

Health-Care Oversight Rule Changes Create Legal Risk for US Employers

Story by John Tozzi • Wednesday

(Bloomberg Businessweek) — US employers spend more than $1 trillion a year on health insurance for workers and their families. While they’ve long had a fiduciary duty to ensure that those funds are spent prudently, most have relied on insurers and other middlemen to define benefits, negotiate prices with physicians and hospitals, and pay claims. Now new federal policies are adding pressure to companies to make sure they’re not squandering employees’ health benefit money.

That won’t be easy in a health-care system where a quarter of spending is wasted and the cost and quality of care vary wildly. The details of prices and fees have long been hidden from employers, kept secret in private contracts worked out by insurers, hospitals and benefits consultants. New measures aim to force them into the open, making it easier for companies to understand where their money is going.

Rules introduced during the Trump administration ordered hospitals and insurers to disclose prices they negotiate. Congress later added the requirement that brokers and consultants that design health benefits programs tell employers whether they’re getting compensation from companies whose products and services they recommend. 

“It’s a double-edged sword,” says Elizabeth Mitchell, chief executive officer of the Purchaser Business Group on Health, which represents dozens of employers such as Apple, Boeing and Walmart. “They now have the information they couldn’t access before, but they also have to act on that.”

The policies are meant to spur the kind of oversight that’s become common with retirement plans since the mid-2000s, when companies faced waves of lawsuits from retirees over their 401(k) plans. As plaintiffs began suing companies for high fees or bad investment choices in the funds, “all of a sudden employers started paying attention,” says Karen Handorf, a former US Department of Labor attorney now at Berger Montague in Washington, DC. Settlements in such cases have totaled in the hundreds of millions of dollars.

US Employer-Sponsored Health Insurance Spending |

US Employer-Sponsored Health Insurance Spending |© Bloomberg

Big health-care companies are increasingly mashups of insurers with clinics, prescription benefit managers, pharmacies and physicians’ groups. The consolidation has hurt competition and increased the potential for conflicts of interest, in part because claims paid out by insurance companies often go to their corporate brethren, says Michael Thompson, CEO of the National Alliance of Healthcare Purchaser Coalitions, which represents employers. Companies that believed they were getting good deals on medical care and drugs have been surprised by what the new regulations have revealed. “When you lift the covers of what’s happening, you start realizing, ‘Oh my God, this thing is a mess,’” Thompson says.

In 2021, a school district in Osceola County, Florida, sued a consultant that had advised it on choosing an insurer. The district said the consultant, a unit of insurance brokerage Arthur J. Gallagher & Co., was secretly taking commissions from insurance company Cigna. Gallagher disputed the allegations in court, and the case was settled in January. Gallagher and Cigna declined to comment. Also in 2021, the state of New Jersey discovered its employee health plan sometimes paid hospitals as much as triple the list price for care. Its insurer, Horizon Blue Cross Blue Shield, disputed that it was violating its contract, and the state says it’s still in talks to resolve the matter.

America’s Health Insurance Plans, a lobbying group, says that it endorses greater transparency and that insurers’ progress in implementing the new policies will improve over time.

Some plans have proven that close oversight of health costs can yield savings. The 32BJ Health Fund spends $1.5 billion annually on benefits for 210,000 workers and families affiliated with the Service Employees International Union. The fund, jointly governed by representatives from the union and various companies, last year removed NewYork-Presbyterian hospitals from its network after determining the system’s prices were higher than others. The hospital group didn’t respond to a request for comment.

The new transparency rules will give the plan even greater visibility into how its prices compare in the marketplace, says Cora Opsahl, director of the health fund. Opsahl estimates that removing NewYork-Presbyterian saved $30 million in 2022, and she says other employers have been trying similar strategies as the new disclosure policies take effect. “Ultimately, you as the employer are now responsible for these decisions,” she says. “I need to know how I’m spending my health-care dollars.”

The new policies were little noticed when they passed in the waning days of the Trump administration, and compliance has been halting, says James Gelfand, president of the Erisa Industry Committee, a lobbying group for large companies. “Every piece of this has some hiccup,” he says. But eventually, as they force once-hidden prices and fees into the open, companies should use the data to demand more competitive rates. Employers that “keep doing exactly what we’re doing” will face lawsuits, Gelfand says. “Plan sponsors always had the responsibility not to waste the employees’ money. But all the health-care prices were secret.”

More stories like this are available on bloomberg.com

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