6 Ways Employers Can Prepare for their Expanded Role as Health Fiduciaries

When asked “who is accountable for a high quality healthcare experience?” a myriad of players likely come to mind: PCPs, specialists, nurses, care managers, insurance companies, and maybe even yourself.

2024 is adding a new player to the list: employers.

Employers who self-fund their employee health insurance are in the midst of a shifting legal landscape that ultimately lays a larger burden on them to ensure the funds utilized for employee health insurance are being used wisely. This increased responsibility, which comes with potentially large legal and financial ramifications, might catch some employers by surprise.

The Shifting Landscape

In 2023, 65% of U.S. employees received health insurance via self-funded employer health plans, according to this Kaiser Family Foundation report. These plans are regulated under the Employee Retirement Income Security Act of 1974 (“ERISA”), which has always placed some level of fiduciary responsibility on the employers. Until recently, this responsibility lacked teeth due to an imbalance of data available to employers. Most employers outsourced claims administration and benefit design to third-party administrators (TPAs). Employers were regularly precluded from obtaining any information, even de-identified, from the TPAs as to how their employees utilized their healthcare. Employers were also kept from the rates they paid to providers. These so-called “gag clauses” ultimately hindered employers from a data-driven assessment of their employees’ cost and quality of services.

The Consolidated Appropriations Act of 2021 (“CAA”) introduced major changes to ERISA. As of December 2023, the CAA requires employers with self-funded health plans to sign an attestation that their contracts with TPAs do not include a “gag-clause.” The removal of gag clauses gives employers access to critical information, including de-identified claims data and pharmacy data. The CAA also introduced price transparency laws (Transparency in Coverage, or TIC), which require most health plans, including employer sponsored health plans, to publicly disclose their in-network negotiated rates and out-of-network allowed amounts. Starting later in 2024, prescription drug prices are also required to be disclosed, although the timeframe for enforcement has not been set forth.

An Expanding Fiduciary Duty

As the proverb goes, with great power comes great responsibility. A duty of prudence has always existed under ERISA. While courts haven’t yet imposed a larger fiduciary duty on employers to ensure healthcare funds are being used appropriately, the lawsuits have begun.

On February 5, 2024, an employee filed a lawsuit against her employer, Johnson & Johnson, alleging, among other things, a violation of the fiduciary duty imposed by ERISA. The Johnson & Johnson case involves the negotiated rates paid for certain medications by Johnson & Johnson employees that were available at lower price points on the open market. In the complaint, the plaintiff’s lawyers summarize the fiduciary duty of prudence as requiring “fiduciaries to act with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.” 29 U.S.C. § 1104(a)(1)(B). Among other things, ERISA’s duty of prudence requires plan fiduciaries to make a diligent effort to compare alternative service providers in the marketplace, seek the lowest level of costs for the services to be provided, and continuously monitor plan expenses to ensure that they remain reasonable under the circumstances.

Over the next few years, we will see courts work to interpret how far this fiduciary duty for employers reaches and what steps employers are required to take to fulfill these duties. But in the meantime,

What should employers and third-party administrators do now to prepare for this shifting legal landscape?

Path Forward

While the extent of those fiduciary duties will be litigated in coming years, the overarching duty of prudence exists now, requiring employers to open their eyes to the data now available without gag clauses.

Employers now have access to:

1. claims data highlighting which providers their employees see and why;
2. prescription data showing what employees are prescribed and purchase;
3. price data demonstrating what they (as well as others) are paying for these services/drugs.

With this data, employers will not only need to ensure accuracy in claims payout, they will need to account for the value of the care their employees receive.

Understanding the value of healthcare requires an analysis of more than just price – low quality providers might have low prices on individual billing codes, but they also provide low quality care which ultimately results in total prices that are higher than expected or reasonable for caring for an individual.

Employers seeking to meet their existing fiduciary obligations under ERISA and protect themselves from future potential litigation are wise to set up procedures now to understand the value of the healthcare benefits they provide to their employees.

TPAs must also consider the value of the provider networks they utilize. While employers will ultimately bear the fiduciary responsibility for these healthcare funds, third-party administrators may take on contractual obligations to help employers fulfill these duties. Instead of employers individually negotiating contracts with physicians, employers are likely to place requirements that the network of physicians servicing the employers’ beneficiaries is high-value and adequate.

An Ideal State

To understand the full impact of this, imagine a different system: A data-driven decision support system with cost and quality data for providers, price transparency data, individual employee healthcare benefits like cost sharing amounts, and the individual employee’s health claims data, with communication via a human care navigator provided by primary care doctors the employee chooses.

This system would allow employers to quickly identify employees with complex healthcare needs and provide them with a compassionate, data-driven resource to navigate their care.

In the current system, if an employee is diagnosed with cancer—a time of immense stress—the employee is often left to schedule a barrage of appointments on their own. The employee uses the directory to select an oncologist without any data on provider cost, quality, ease of access, or their out of pocket expenses. These care navigation apps or services provide some directional assistance, but often miss the mark, resulting in employees paying thousands in out of pocket expenses when they receive a transfusion from the wrong location or see a low value provider.

What if, instead, a human care navigator at a chosen and trusted physician’s office, with access to a data-driven decision support system combining cost, quality, price, and out of pocket expenses, assists the employee in scheduling the many necessary appointments with high quality providers, while also understanding and explaining the out of pocket costs the employee will incur?

This ideal state is a quickly emerging reality with these recent legislative measures. Building on the CAA gag clauses and TIC policies, the most recent Physician Fee Schedule created four new billing codes called Principle Illness Navigation (PIN) codes allowing physician offices to be paid for care navigation services when a patient is diagnosed with a significant illness. Additionally, data sharing between entities is moving away from thousands of Business Associate Agreements (BAAs) to a Common Agreement executed only once per entity. This new age of data interoperability and transparency will provide a path for employers to not only provide their employees with a much valued data-driven resource for navigating care, but also manage health care expenses in a more proactive and responsible manner by quickly identifying high risk patients and getting them the necessary, high value care.

What Should Employers Be Doing Now?

While the recent policy changes have made way for the ideal state, it is still in the future. As we move in that direction, here are six steps employers and third-party administrators should proactively consider taking to get ready:

1. Audit claims processing – Employers must ensure that all funds expended by self-funded health plans are justified and that any funds due are obtained.
2. Monitor and improve the health of their employees – Employers will have an even higher interest in maintaining a healthy employee base. As one example, unplanned hospitalizations can sometimes be mitigated with better preventative care or more timely interventions for employees with a higher risk of hospitalization. Employers have the ability to add terms to the contracts for third-party administrators, requiring timely intervention and preventative care for patients at risk of hospitalization. Employers are also able to contract directly with specific healthcare providers to engage in data-driven care acceleration. Near real-time enrollment of qualifying beneficiaries in programs like complex patient management or high cost patient management should become standard requirements for an employer – TPA contract, and should be on the horizon for Employers to take on directly.
3. Ensure negotiated rates for providers and facilities are reasonable for the market – While the price transparency data is unwieldy at present, its public existence will mean employers must ensure the rates they are paying providers and facilities are in line with other negotiated rates for their market.
4. Establish a high value network of providers for their employees – Employers should ensure that employees have adequate access to high value medical care. This means a network of providers and facilities sufficient to meet the needs of their employees’ health with an appropriate number of available primary care doctors and specialists. And not all providers can be considered “high value.” This network of providers must provide high value care and minimize instances of low value care.
5. Inform provider and facility selection – Employers also have the satisfaction of their employees to balance. Many employees have strong relationships with certain healthcare providers. Employers will face a difficult decision if these providers are inefficient and poor quality. Employers will need data not only to help them identify these providers, but also to assist these providers in understanding their areas of opportunity and helping employees find alternatives if needed.
6. Target employee education programs for high-value care – Shared decision making is a centerpiece of patient-centered care. Understanding the health issues their employees face will allow employers to provide tailored educational resources for employees to broaden their knowledge regarding treatments. As an example, if an employer learned that their employees have a high incidence of low back pain, employers could provide education on treatments ranging from physical therapy to spinal fusion. Additionally, providing employees with price comparison data alongside provider quality data can help employees make more informed decisions surrounding which providers they elect to see.

How CareJourney Can Help

This new fiduciary duty, while critical and transformational, is not going to be easy. CareJourney stands ready to support employers and third-party administrators as much as possible.

• CareJourney began as a company ingesting claims data. Building on this core competency, we can provide employers and third-party administrators with:
  • Patient level insights to identify high risk patients for intervention;
  • Identify trends in utilization;
  • Map the network of physicians that employees use;
  • Identify low value care;
• Our Provider Intelligence data is the ultimate resource for curating high performing networks, evaluating the performance of existing networks, and understanding the factors that contribute to “high value” performance in a user-friendly format. Our vetted, analytically rigorous approach can serve as an objective, third party view of performance to employees, as well as providers helping to narrate the story of performance for you.
• Determine levels of medication adherence within their employee base, and more.
• CareJourney’s Price Transparency data sheds light on negotiated rate insights for employers and third party administrators.

If you are currently a member and interested in how CareJourney can help you gain these insights, please reach out to support@carejourney.com for more information. If you are not a CareJourney member, please email us at info@carejourney.com to learn how we can support your needs.