ERISA Fiduciary Governance (Part 3 of 4)

0:00
Welcome everyone to Orisa Fiduciary Governance part three of four: Selecting and Monitoring Service Providers. Thank you all for joining us. The benefits compliance team will be answering the questions you send through the Q&A today. We'll try our best to answer all your questions, but for whatever reason we're unable to get to your question today, please follow up with your adviser for further assistance.

0:21
Today's presentation is being recorded. We'll be sharing the recording in the follow-up email and on the NFP website. If there are any portions of this call that you missed, by Monday, you'll receive an email with a link to the full recording. The PowerPoint slides used during this presentation will be shared in the same email.

0:37
At this time, I'll hand it over to Chase Cannon, Senior Vice President and Deputy Chief Compliance Officer of Benefits Compliance at NFP, Carol Wood, Vice President and Counsel of Benefits Compliance at NFP, and Travis Walker, Regional Vice President of the West Region of Benefits Compliance at NFP. Chase, the floor is yours.

0:55
Amber, thank you so much for that intro. Thanks everybody for joining today. We're so excited that you're with us and that you've stuck with us. This is part three of our four-part series on Orisa fiduciary governance and we're just grateful that you're here.

1:09
We know it's a lot when it comes to figuring out what all of this Orisa fiduciary governance and fiduciary duties means for you as a company sponsoring a group health plan. We know it's also a process ,  for educating and learning about this, and also for understanding and implementing solutions.

1:34
It's all a process, and it's going to take time. We're glad you're here.

1:45
Carol and I have been kind of the primary presenters on this series for the first couple of webinars, and we've had different special guests. Today we have another special guest who's a member of our team, Travis Walker, who also has a unique perspective and background.

2:06
I think everybody knows myself and Carol and our backgrounds as Orisa attorneys with NFP. Travis, coming over from the carrier side a little bit ,  you want to take a second to just give us your background really quickly so everybody can know your expertise?

2:24
Well, hi everyone. Hey, happy to be here and provide some insight during the conversation today. So prior to joining NFP, I served as a compliance officer for a third-party administrator and also oversaw a compliance team for one of the major health insurers.

2:49
That scope of work, which spanned nearly a decade, included compliance support for group fully insured and self-funded business. It also covered accepted benefits and individual insurance across multiple brands nationwide. Like Chase and Carol, I am an attorney by trade and happy to provide some general guidance as we go through the discussion today.

3:13
Yeah, it's awesome. Travis has been with us for a little bit now, but we're so grateful for his background, and it will help illuminate some of the things we're talking about today.

3:27
The focus today again is on part of the fiduciary governance process ,  specifically selecting and monitoring service providers. Obviously very relevant with his background and we're excited to get his perspective on what we're talking about today.

3:39
Quick disclaimer: this isn't meant to serve as legal or tax counsel or advice for you. Seek out your own legal or tax advice for specific advice. Our information is current as of today.

3:58
With that, we're going to get into our agenda...

4:03
We're going to talk about delegating plan duties to a service provider. What does that mean? Defining the role to outsource.

4:10
Selecting a TPA, ASO provider, or carrier. What are the contracting considerations there? What does the monitoring of that specific provider look like?

4:21
And we're going to talk a little bit about recent litigation because that's always playing a big part of this, right?

4:26
We kind of started our series talking about how litigation has really thrust this idea of Orisa fiduciary governance into the limelight.

4:33
And even though the Orisa fiduciary duties are not new, recent litigation is just really pushing this into the spotlight. That’s one reason we’re talking about it.

4:45
So it’s helpful to understand what’s happening in the courts, what are the cases, what are the plaintiffs in those cases arguing. That in turn helps inform us and you as plan sponsor on the things to focus on as you're setting up and running your fiduciary governance program.

5:04
We'll talk a lot about the resources we have to help support all of this as well. But Carol is going to come in here and get us started talking about delegating plan duties and who’s responsible for selecting service providers.

5:16
Carol, you there? Good to take this part?

5:22
Yeah. Thank you, Chase, and good afternoon everybody.

5:28
This first few slides are just a bit of review here. We’re talking about delegating to your service provider. Well, who’s responsible for doing that delegating?

5:39
It’s generally the Orisa plan administrator who’s responsible for the plan’s overall compliance and operations. It’s really an extensive role they play.

5:54
They are the named fiduciary, and their responsibilities include prudently selecting plan service providers, which would include the medical plan carrier or TPA, and also maintaining the plan’s claim procedures.

6:11
The plan administrator should be specified in the Orisa plan documents. The plan sponsor employer, for a corporation, the board of directors, would be the default plan administrator if no one is specified.

6:22
Next slide.

6:29
So how does the plan administrator delegate duties to a service provider?

6:35
We know that the plan administrator can delegate those duties, including fiduciary duties, to a third-party service provider. But it has to be in accordance with the Orisa plan document.

6:42
When we talk about fiduciary duties, we’re talking about those that involve the exercise of discretionary authority or control, either over the plan or the plan assets.

6:56
If fiduciary duties are delegated, the party accepting that delegation becomes a fiduciary accountable for the delegated task.

7:01
For example, we’ll be talking more about this today, a self-insured plan administrator contractually delegated fiduciary authority to review and decide plan claims and appeals. Then that TPA is a fiduciary to the extent of that claim review authority.

7:27
The plan administrator must act prudently in selecting a third party. They also can’t contract away their own fiduciary status by the delegation.

7:38
Rather, the plan administrator remains responsible for monitoring the third party and assessing whether they are properly performing the delegated duties.

7:52
Okay. So, we know we're going to outsource certain responsibilities, invariably, any plan administrator does, but it's important to define that role that we're outsourcing.

8:05
So, what are a group health plan's obligations with respect to plan claims?

8:12
This is a role that almost all, if not all, plan administrators outsource to some degree. The employer, as a plan administrator, is responsible for maintaining reasonable claim procedures so participants can receive the promised benefits.

8:30
Most employers would typically hire a carrier or a TPA to process claims but should understand the general claim requirements in order to be able to prudently select a provider who can comply with those requirements.

8:46
Of course, this is particularly important for fiduciaries of self-funded plans who may retain some fiduciary role with respect to claims adjudication.

9:00
So employers should have a basic familiarity with the timeframes within which to decide claims, the contents of benefit denial notices, and also the standards for appeals of benefit denials.

9:06
Additionally, newer external review requirements and certain requirements under the No Surprises Act.

9:24
What are the required timeframes for plans to decide claims? These vary, and they’re outer limits within which plans can decide claims.

9:33
For an urgent claim, where the participant’s health would be threatened if the normal pre-service timeframe applied, it’s as soon as possible, not later than 72 hours. That’s for both claims and appeals. That’s a quick turnaround time, understandably.

9:52
For pre-service claims, before medical care is received, such as pre-authorization, it’s a reasonable time, not to exceed 15 days for claims and 30 days for appeals.

10:06
Most claims, which are post-service, are a reasonable time not to exceed 30 days for claims and 60 days for appeals, with certain extensions and specific timeframes when more information is needed from the claimant.

10:21
What must be included in the notice of a claim denial?

10:29
If a plan denies a claim, a notice obviously needs to be sent to the claimant, the participant, and importantly, it should be written in a language that the average participant can understand.

10:40
It should specify the reasons for the denial (e.g., it's not medically necessary, it’s not covered by the plan), reference the specific plan provisions upon which the denial is based.

10:53
If applicable, any additional information that’s needed from the participant so they can perfect the claim, they can appeal the claim. Then, a description of how to initiate an appeal, and rules and other information relied upon in the decision.

11:08
Now, the idea behind the claim denial notice is that there should be a meaningful dialogue.

11:21
The claims administrator should be explaining to that participant why their claim was denied, so they can proceed to move forward, assuming that it’s for a covered service. Maybe additional information is needed.

11:40
The same goes for an appeal, there’s some additional information, but it’s very similar. This is an area where, as we’ll discuss later, we see a lot of litigation.

11:46
In fact, there's an article in Compliance Corner that I wrote, I think it was published today, where there's a lot of frustration because participants aren't receiving the notices that meet the requirements. After exhausting their process with the plan, they go to court and sue the claims administrator.

12:10
So, it’s really important to understand what’s required in these notices.

12:19
What are the standards for appeals of benefit denials?

12:26
Basically, the claims procedure must provide for a full and fair review of a benefit claim. The minimum standards for appeals require that the appeal be reviewed by someone new, it can’t be the same person who reviewed the initial decision or that person’s subordinate.

12:44
The reviewer must give no deference to that initial decision. The reviewer must consult with a medical professional if the denial is based on a determination as to whether a particular treatment, drug, or item is experimental or not medically necessary.

13:04
Plans can require no more than two levels of review. Mandatory binding arbitration of claims is generally prohibited, but non-binding arbitration is permitted if done within certain timeframes.

13:21
How did the ACA and No Surprises Act affect claim review requirements?

13:26
The ACA amended Orisa by enhancing internal claims and appeal requirements. One of the main ways is by making external review procedures available.

13:36
This is generally for non-grandfathered group health plans, which is probably most plans, and is designed to make sure that claimants denied coverage have a judgment from an independent reviewer (not someone employed or contracted by the health plan) evaluate that denial.

13:55
Self-funded plans generally have to comply with DOL external review procedures. The process typically is arranged through the TPA or ASO provider.

14:10
Fully insured plans generally must comply with their state’s external review process, and the carrier is typically responsible for arranging that external review process.

14:20
The No Surprises Act covers surprise billing claims and makes them eligible for external review. This extends to grandfathered plans as well.

14:38
In most cases, or in many cases, the plan administrator, particularly for a fully insured plan, is going to delegate the entire responsibility of the claims review and appeal process to the carrier.

14:56
With self-insured plans, in some cases, the self-insured plan sponsor may choose to be involved, to have some control over the process. Maybe they view it as a form of monitoring, and they may handle a second-level claim appeal.

15:15
In this case, there’s a lot to consider if an employer is considering getting involved in the appeal process of a self-funded plan. They would need to have a prudent process in place to review the claim appeals, and they’d have to strictly comply with all these regulatory requirements we just discussed, the timeframes and the notices.

15:39
They’d have to interpret the claims consistently. A full and fair review is required. Gather information as necessary, medical information and records. Consult with experts and carefully document the process.

15:59
Employers assuming this role should also consider whether they should establish a committee to facilitate such a process.

16:05
There was a great article, an observations article in Compliance Corner, that discusses this issue. But I did want to ask you, Travis, what your thoughts are on this. In your experience, how many self-insured sponsors, just among the ones you dealt with, chose to take on this responsibility?

16:26
Well, thanks, Carol. I appreciate the question. And one of the phrases you mentioned, I love, "a lot to consider." Sometimes health insurance can be thought of like a sliding scale.

16:38
When a plan sponsor is looking at a fully insured option, while they can’t delegate all of their responsibility, many of the day-to-day functions are done by that insurance carrier.

16:51
When we move into the middle part of the sliding scale, the ASO, where a provider is doing most of those services but because the plan is self-funded, the plan sponsor has additional responsibilities, there’s more to consider.

17:08
That could be whether to have just the one level of appeal or if a second level of appeal is part of the plan design, who's going to do it?

17:14
The NFP article that you mentioned lists a lot of great things that are reflected here in the slide, in terms of whether that second level of appeal, if it is established, should be done by the ASO administrator or the TPA, or if instead the employer wants to take the approach of organizing a committee.

17:33
In reality, we know there’s a lot going on in the world, and oftentimes plan sponsors or people called to serve on committees, it's not the only thing they do. But the regulations require certain standards be met.

17:53
If a plan sponsor does go down the route of handling a second-level appeal, some things to consider, like were mentioned, are ensuring that the members of the committee have familiarity with health plan operations, have experience interacting with claims.

18:07
That can be key to whether a claim is denied for simple things, like lack of medical or supporting documents, or if a claim is denied for the very simple reason that the wrong code was put in and had the provider billed it differently, it would have been approved.

18:29
The other thing, too, is the realities of ensuring that if a committee is organized, it’s documented correctly, that the right level of note-taking or comfort is listed, and that there’s sufficient personnel to be able to hold that committee.

18:48
Another consideration too is the type of information that they’ll receive access to if a committee is organized.

18:55
Later in the presentation, we’ll talk about how third-party administrators, what I’ll call the far end of the sliding scale, can create more opportunities for carveouts or for more parties to be involved.

19:00
But it’s certainly a lot to consider, among all the other things that many businesses have to juggle.

19:12
Thank you so much for such a thorough response, Travis. Very insightful.

19:21
Yeah, I really like how you described that, Travis, as a sliding scale, or a dial. Are you dialing up the intensity of what’s required here for fiduciary governance? How involved do you want to be?

19:33
Particularly for self-insured, but I think it’s really important to note that here, if you're fully insured, the dial or the sliding scale is fairly low for some of these things we're talking about today.

19:50
The appeals process is the specific example here. Whereas if you're self-insured, you’ve got a lot more skin in the game. You're seeing more information and have more discretion in what you're able to do.

20:04
Fully insured, you’re kind of bound within what a carrier is offering. Versus self-insured, you’re getting a little more creative and making some of those discretionary decisions on claims, networks, prescriptions (if you have a carveout), stop-loss insurance, you just have a lot more going on and a lot more decisions.

20:22
So you’re going to have a bigger responsibility to do some of this in the prudent vein that we’re talking about.

20:30
So with that, we're going to move into the next section of our presentation, which is talking just about this. Again, this will be a little more in the realm of a self-insured plan, with a little more responsibility.

20:57
High level again, we want to get back to this idea of what it’s all about, and that’s: How do you, as an employer or plan sponsor, prudently select vendors, service providers, anybody who’s assisting with the plan?

21:10
We’re going to focus on carriers and on TPA and ASO providers here. But to start off, there’s really no one mandated process, right? There’s not a specific outline that you follow and check all the boxes and you’re just fine.

21:26
You really have flexibility to determine your approach. But with that flexibility, you do need to consider the benefit plan, the plans you’re offering, the size, the needs of your specific organization, your employees, and the circumstances there.

21:45
So really, that’s some flexibility, but it comes with a heightened responsibility to look at what you have and what you need. And that’s going to be very specific to you.

22:04
But really, you need to be able to show that you’re engaging in a prudent decision-making process. That’s what we’re talking about here.

22:11
So the process should be more generalities, more collecting and carefully evaluating sufficient information.

22:18
We’re going to talk about some of this, qualifications of the service providers, reasonableness of their fees, and how do you get to the decision that’s most suitable? Who’s the most suitable candidate?

22:28
And then documenting that process.

22:31
For some employers, not all, but some may choose to go through an RFP process. That might be the most effective way to do this. That is an effective way to demonstrate your due diligence and can also streamline the information-gathering and evaluation process.

22:54
I think of it a little bit like, probably because I just went through a home renovation, but think about how you go out for three or four bids. You’re looking at all this information, and you’re looking at each subcontractor for a particular job to make sure you vet them out before you let them into your home.

23:10
That’s kind of what we’re talking about with this process, with the additional step of documenting it, so that if somebody else were to come and look at your process, they could see how you got to your decisions and see that you were reasonable in that decision and what the variables were.

23:31
So with that, in the self-insured context, we kind of have this idea of a TPA versus an ASO provider.

23:39
Travis, I’m going to ask you to go through this slide and talk about this because you have the expertise here.

23:46
Well, one thing we know about health insurance is there's a lot of acronyms. So in the world of moving away from that fully insured space, people may come across the TPA or ASO options.

24:04
I'll just note a couple of the bullets here. When we think about TPAs, those tend to be entities that are generally viewed as independent of insurance companies. In some cases, they’re owned by a holding company of a large insurer but utilize separate branding and may have different offerings.

24:25
TPAs are utilized at the far end of the sliding scale because they’ve got the options to customize services. If a client is looking to utilize a particular provider network or a different utilization management company, that model of a TPA may be the right choice.

24:44
Some cons, however, are that there’s extra coordination required depending on the differences in how the TPA’s “pipes” are set up to different vendors. That could be, if a carrier’s network receives the claims, how they take that information, price it, send it to the TPA to adjudicate.

25:06
Then who functions like printing the benefit denial notice we talked about earlier, and sending it to a member? Who handles customer care?

25:18
For some clients, a TPA approach is right because, based on the needs of their population or the services they’re looking for, that level of customization fits.

25:30
In that middle ground approach is the ASO. Generally, these are entities that perform administrative services, like a TPA can do, claims adjudication, medical management, customer service, or other things.

25:40
But they tend to be the insurance company offering fully insured coverage, this is their self-funded model.

25:52
Some pros are they tend to be more streamlined, there’s not that “hot potato” aspect as data is moving from one entity to another back and forth.

26:00
Keeping in mind things like claims processing timelines we mentioned earlier.

26:07
They also have the ability to coordinate internally in a sense, because they are providing more services under one roof.

26:13
Drawbacks, however, could be potentially less flexibility, less benefit customization, less transparency, in part because many of the operations being utilized to support a self-funded plan are the same inner workings used in the fully insured model.

26:28
It’s just the funding aspect of ultimately paying for services that comes back to the plan sponsor.

26:41
So self-insured plan sponsors have a lot to consider and, depending on their needs, can evaluate a varie

26:53
That could be a mix of information on fully insured, ASO, or TPA services. Depending on the needs of an employer, that may change over time.

27:06
My experience in the market: Some people start with fully insured, move to TPA, then back to ASO because the customization was too much, or vice versa.

27:20
Clients move from fully insured to ASO, try that, but later bring in a trusted TPA partner due to vendors or preferred services available on the market.

27:34
This is where fiduciary responsibility, asking the right questions, and things we’ve noted really come into play, based on what a client thinks its current needs are or where it may be going in the near future.

27:51
Yeah, thanks. This was super helpful to just walk through the pros and cons, TPA versus ASO, and understand the difference. Sometimes those terms get thrown around as the same thing, and it's helpful to distinguish them.

28:02
Yeah, again, all of this is super dependent on your structure, your funding structure, obviously (fully insured vs. self-insured), what’s going to make sense and how far you need to go in asking some of these questions.

28:19
It depends on, as you said, what the carrier is allowing, what they are offering, or the service provider generally, and then, just by size as well. I think there are different considerations depending on your size.

28:33
But typically, the type of information that is gathered and evaluated in this process, and again, the actual steps in the process for going through this, would depend and vary based on the carrier or the ASO or the TPA provider.

28:59
So we’re not going to go through the mechanics of the steps of this process, but just generally speaking, the type of information is really coming back to that contractor or subcontractor working in your home type of idea.

29:12
These are the kinds of things you want to know, learn about, and evaluate when it comes to selecting who’s going to be working on your plan.

29:17
Look at the firm itself: What’s the financial condition? Are there any bad Yelp reviews, in a way, talking about recent litigation or enforcement actions?

29:23
Performance records and experience with group health plans, again, considering the size and complexity of who you are as a company and as a benefit plan.

29:36
Whether subcontractors are going to be involved, Is there somebody else under this service provider that’s going to be providing services as well?

29:42
Workforce capabilities, whether they can meet the needs of the plan.

29:48
Quality of care, this is getting into detail, but the scope of healthcare services, medical providers, what are their ratings and accreditations and experience and qualifications?

30:00
What does that look like? Provider network access. Licensing status, is there any concern there?

30:08
Accountability, access, and responsiveness.

30:14
If there are any statistics that are out there regarding the claim and appeals process that we talked about, quality control, and then if there’s any way to learn about the timeframes for responding to questions or problems, or issues that have come up in the past.

30:27
Technology resources, moving to the next slide but continuing the same pieces of information that might typically be gathered in this process.

30:38
Technology is important, obviously, with where we are in the world.

30:44
The ability to address new tech requirements or accommodate a customized plan, What is the compatibility with the different systems between the plan and the carrier or service provider?

30:56
Cybersecurity is huge right now. What are the security standards? Is there any insurance coverage on those?

31:02
We included a link here from the DOL. They have some tips relating specifically to hiring service providers with strong cybersecurity practices.

31:20
That’s really important, a great thing to review, to get it straight from the DOL on what they think are some good tips there.

31:27
Compliance, we love compliance here, obviously, but what is the company you’re hiring doing with compliance?

31:33
Do they care about applicable laws? Do they speak to it fluently and understand it, particularly when it comes to things like the DOL claim regulations and HIPAA privacy?

31:47
We just talked about cybersecurity, but what about HIPAA’s privacy and security rules relating very specifically to the information that could be seen here, particularly in the self-insured context?

31:58
What are the other requirements or obligations that the carrier, TPA, or ASO provider can assist with, like mental health parity NQTL comparative analysis or the RxDC reporting?

32:17
Some of these newer requirements, where it really helps to have buy-in and understanding from a service provider so that when you have questions, or even if NFP is assisting, we want to facilitate a discussion and understand what the carrier or TPA can do.

32:30
Just knowing that they can speak to these things a little bit better.

32:35
What are the other services they can provide?

32:42
One example here is administration of COBRA, that would go beyond claim adjudication. Creditable coverage determinations and notices, HRA integration, point solution programs, or wellness programs, how do they coordinate with those different parts of the plan?

33:00
And then one that is particularly relevant for self-insured plans: Are there specialized services? Is there experience or expertise servicing a specific industry?

33:12
Then it all comes back to fees, right?

33:20
How is the compensation from the service provider? Again, when evaluating the compensation, the employer as a plan fiduciary is not required to select the lowest bidder.

33:33
Lowest cost does not always mean most prudent.

33:40
But you do have a responsibility to ensure that the compensation is reasonable for the services provided.

33:46
Understanding things like estimated fees and expenses, whether those fees are assessed individually or part of a bundled arrangement.

34:01
Reviewing whether there are any additional fees, any referral fees, commissions, or revenue sharing, that kind of thing, is super helpful.

34:12
Again, this is a newer law: you should be receiving what we call a 408(b)(2) compensation disclosure.

34:18
408(b)(2) is just the section of ERISA where that requirement is found. It's also referred to as a broker compensation disclosure, that would be specific to a broker.

34:34
But just a plan service provider compensation disclosure should be telling you what the compensation is that you are receiving for a particular set of services.

34:40
Review that carefully. Evaluate the compensation. Ask questions. Benchmark. Compare with others providing similar services.

34:47
Identify any potential conflicts of interest, which should be disclosed to you.

34:54
That process should be documented. We’ll talk about documenting here in a second.

35:00
Getting that compensation and making your decision, and again, cheapest doesn’t always mean most prudent, but figuring out what works best.

35:11
If you are going with a more expensive service provider compared to others, what are the reasons for that?

35:18
What are the additional services? Is there a better track record? Whatever helps support that decision, do

35:31
Speaking of documentation, what does that look like?

35:37
Again, this will be very specific to your organization. There’s no specific form of documentation or template from the Department of Labor or any other regulatory agency.

35:49
But it’s the idea of maintaining accurate and well-drafted meeting minutes. It doesn’t have to be meeting minutes specifically, but if you have meetings, be able to have those in some form, notes from key decisions.

36:06
We have in our fiduciary toolkit a sample of meeting minutes. That provides a concise summary of the key discussion points, deliberations, outcomes, and it can help, written in a neutral tone, to establish the process that went on there.

36:25
So if you have meeting minutes, that’s a great way to do this.

36:31
Without meeting minutes, without some type of record of your process, your discussion, and the analysis you went through to get a service provider, it’s going to be hard to show that you engaged in that required prudent decision-making process.

36:49
Particularly if you’re talking about this months or years later, and we’ve seen this in litigation, which we’ll talk about in a second, if somebody brings a case against you alleging you didn’t go through this process, it’s very difficult to remember what the process was without good records.

37:13
It’s even harder to prove your case in court if you don’t have that documentation.

37:20
So we do say: retain whatever documentation you have, meeting notes, analyses, etc., generally for about eight years, in a safe place. Make sure whoever’s in charge of the plan, the fiduciaries, all are aware of where that is and that it’s ready for review or examination when needed.

37:39
A lot to consider there. I know that’s a lot of information. But again, high level, think about the contracting example. These are the people, and when I say “people,” I mean entities and the people within them, who are going to be involved with your plan.

38:53
Contracting, I really look at it as another form of documentation that an employer needs to consider, and it’s a very important form.

39:00
It’s a binding legal document and should clearly spell out the obligations of the parties.

39:18
There’s been a lot of discussion and arrangement prior to this contract, and now we need to make sure it’s memorialized in writing in that legal document.

39:25
Of course, we can only provide general information. We would always advise an employer to have the agreement reviewed by their legal counsel experienced in employee benefits law, prior to execution and before any performance under that agreement begins.

39:47
If an RFP or similar selection process was used, that draft agreement should be carefully compared to the information provided by the service provider during the process.

40:00
Since the services in the agreement will involve interpreting or applying plan language, the agreement should coordinate with the official plan documentation, i.e., the ERISA plan document, SPD, etc.

40:19
The contract should specify that the parties will follow the claims and appeal language in the ERISA plan documentation.

40:26
Fiduciaries have the duty to follow the plan language.

40:32
Where the TPA agreement doesn’t assign any responsibility for a particular service, and a gap arises, the employer, as plan administrator, will remain ultimately responsible for performing the service.

40:56
So if something isn’t spelled out in the contract as being delegated, it will be the plan administrator’s responsibility.

41:10
What are some key provisions to review in the contract?

41:17
Obviously, services and performance deadlines. Make sure everything’s spelled out.

41:24
Fiduciary status and the standard of care, deciding claims and appeals is a fiduciary duty, so make sure the party you’re delegating to acknowledges their fiduciary status and agrees to adhere to ERISA’s standard of prudence, loyalty, and following the plan.

41:41
Subcontractors, Is the TPA going to use subcontractors? Will they notify the employer and guarantee their performance?

42:00
Subcontractors can be tricky. Fiduciaries are responsible for monitoring subcontractors but don’t have a direct contract with them.

42:15
Make sure your agreement with the carrier, TPA, or ASO ensures their responsibility for any subcontractors.

42:28
Compensation, fees, and expenses should be clearly specified. Also, any changes, such as in enrollment population, that could impact fees.

42:38
Confidential and data security is critical. Each party has proprietary and confidential info, and there’s also PII and PHI of employees. This may be addressed in the BAA.

42:54
DOL guidance is really helpful here, sometimes even exchanging cybersecurity insurance information is part of the discussion.

43:20
Access to claims data, under the CAA 2021 gag clause prohibition, ensure gag clauses are removed from contracts. You want to be able to access this information to fulfill your fiduciary obligations and for cost containment analysis.

43:59
Indemnification and limitation of liability are important, refer to your legal counsel to review. Indemnification protects from losses due to the other party’s conduct. Limiting your own liability is a risk management tool.

44:24
Audit rights, this leads to the next section. The employer should reserve the right to audit the service provider’s performance. Spell this out in the contract, make sure it’s not too restricted.

45:03
Even if you don’t conduct an audit, you want to retain that right in case it becomes necessary.

Monitoring Performance

45:08
Chase: Thanks, Carol. Monitoring is the idea of continuing to review and evaluate how the service provider is doing.

45:29
We’re not done once we’ve made the right selection and documented it, we need to continue.

45:44
Include in the contract requirements for periodic reporting and audit rights. Then, establish a formal process to review performance at regular intervals.

46:00
Have internal meetings to read reports, ask questions about policies and practices, including AI use in claims processes.

46:38
Verify actual service fees charged, sometimes there are extra or mistaken fees.

46:56
Follow up on participant complaints and hold meetings to discuss plan operations.

47:08
Conduct periodic evaluations of claims determinations for accuracy, timeliness, and substantiation.

47:19
Audits can vary: due diligence audits (random claims sampling), appeal audits (internal/external reviews), implementation audits (before switching vendors), and customer service audits.

47:59
It all depends on plan size, type, and structure. But the key is to meet regularly and document what’s going on.

Litigation Update

48:47
Chase: Let’s shift to what’s happening in the courts, Carol will walk us through, with input from Travis.

49:05
Carol: First two cases relate to the claims review process. In the first, parents were denied mental health/substance use benefits for their teenage daughter.

49:41
The appeal correspondence from the plan was grossly deficient, not meeting DOL requirements. The court was exasperated and remanded the case.

50:12
Deficient denial letters are commonly cited in courts. It’s a real problem. There’s frustration that notices don’t explain what’s needed.

50:38
There was an ERISA Advisory Council initiative recommending change. We’ll see what happens under the new administration.

51:03
Next case involves AI. Plaintiffs sued Cigna over using algorithms instead of medical directors in certain determinations. The court allowed the case to proceed.

51:48
We accept AI in simple claims, dental, vision, low value, but not where clinical judgment is required. That’s the issue here.

52:07
Travis: Whether fully insured or TPA, everyone seeks cost efficiency. AI, automation, offshoring, all are common. Plan sponsors should ask questions and feel comfortable.

52:49
Litigation is a canary in the coal mine for issues, especially when PHI access is limited. Watch what comes through complaints and appeals.

Final Takeaways

55:27
Chase: Approaching the end of the hour. Final takeaways

• You can delegate fiduciary obligations per the plan document.
• Define the role you want to outsource.
• Select prudently.
• Evaluate compensation, it must be reasonable (not necessarily cheapest).
• You may need legal counsel to review the contract.
• Monitor ongoing performance.
• Document everything.

57:09
We have a great publication: ERISA Fiduciary Governance: A Guide for Employers. If you don’t have a copy, your NFP contact can get one.

57:30
It includes steps for a fiduciary governance program, meeting minutes templates, committee info, checklists, and more.

57:50
We’ll send the slides, recording, and publication to anyone who registered.

58:07
Looking ahead, our fourth webinar in this series will be in September. You can view Parts 1 and 2 on NFP.com.

58:27
We’ll keep you updated in our newsletter, Compliance Corner.

58:57
They’re going to be inside your “house,” so to speak, working on the plan, working with your employees, and serving the participants of your plan.

59:04
You want to do this due diligence process to make sure you feel comfortable with whoever is doing that.

59:10
That’s really what we’re talking about here, and then documenting it so you can show that you went through this process.

59:16
Hopefully that helps with some of the high-level information you would want to look at, review, and analyze.

59:29
I’m going to flip it over to you, Carol, to talk a little more specifically about contracting.

59:36
Right, we’ve selected who we think is best to work with the plan here as our service provider, as our carrier, as our TPA or ASO provider. What do we need to consider when it comes to contracting with that entity?

59:46
Yeah, thanks so much, Chase.

59:32
Thanks Carol and Travis, great insight today.

59:44
We’ve been answering questions in the chat. If you still have questions, reach out to your NFP contact.

59:55
Amber: Thank you, Chase, Carol, and Travis for sharing your valuable time and expertise.

1:00:01
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1:00:11
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1:00:17
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1:00:28
That concludes our webinar. Thank you everyone for joining us and have a great day.