The CAA will ensure that doing the right thing is the only option

“Why do I even have health insurance?” This is a question frequently asked by hard-working Americans who notice a significant portion of their pay being deducted for health benefits, yet still have additional costs when they go to the doctor or pick up their prescriptions.

In the current health care economy, employers at the mercy of large carriers are often faced with increasing premiums and deductibles and may feel helpless in easing the financial impact of health care on their employees.

Over the past decade health care costs have risen exponentially, and employers may be unaware that alternatives exist to offer high-quality, affordable care in the workplace. Now there’s a new urgency for employers to get up to speed as quickly as possible. The Consolidated Appropriations Act of 2021 (CAA) will soon begin holding employers accountable for upholding their fiduciary responsibility and exploring insurance options that lower the cost of employee health care.

Word is circulating that the CAA may allow employees to sue employers if they don’t effectively manage their health care benefits. Even though the idea of employees taking legal action against their employers regarding health care benefits sounds terrible, if this interpretation is correct, it should have a positive effect on the health care industry.

Should employers be worried about this new eventuality? No, not all of them. Most employers want to help their people — they just don’t fully understand that they have options.

The new CAA guidelines will push employers and their brokers to explore other avenues that lower health care costs. It is simply establishing a framework to protect employees from medical debt — the leading cause of bankruptcy in the United States.

What is the Consolidated Appropriations Act of 2021?

Among other things, the CAA established protections for consumers related to surprise billing and price transparency in health care. It also designated plan sponsors as fiduciaries, holding them accountable to “properly manage” employer-based health plans.

The law requires insurance companies and health plans to submit information about prescription drug and health care spending to the departments of Health & Human Services, Labor and the Treasury. Prior to the passing of this act, there was no framework to ensure the protection of employees and their benefits.

Past precedent has been set

The Employee Retirement Income Security Act (ERISA) is an example of how consumer protections have played out in the past. After ERISA was passed, class-action lawsuits were filed against large corporations and prestigious universities, alleging the payment of excessive fees for retirement plan administration.

These lawsuits accused the organizations of failing to supervise service providers who were charging excessively high record-keeping fees through revenue sharing, and neglecting to conduct request for proposal (RFP) processes to guarantee reasonable service provider fees.

The end result? People with retirement plans saw their fees drop from 7% to less than 1%. What will the result of the CAA be when it comes to employee benefits? We’re looking at a future where employers, with the help of their benefit brokers, become proactive and take steps to protect their employees and optimize health care spend.

Employers can get ahead of this

It’s difficult to nail down at the present time exactly where the line will be drawn as to what constitutes “mismanagement” of health benefits. But there are steps employers can take now that will provide employees with more cost-effective benefits and savings tools.

The first thing an employer needs to do is to be proactive, shop around and use the RFP process through a broker or benefits consultant when it comes time to renew your health benefits. Don’t assume the status quo of what was done in the past is the right answer for you as the employer, or your people. Get multiple quotes to understand the levers you may be able to pull to reduce costs and increase coverage. As an organization leader, you are responsible for considering alternate paths that could reap rewards for you and your people.

One thing to consider during the renewal process – even for an employer with as few as 10 people – is if you should stay fully funded or look into self-funded options. Groups that are self-funded are able to add more solutions to control costs such as adding virtual care options or adding an aggressive pharmacy benefit contract. While self-funding is not for every group, it is something most should consider and work closely with their brokers to assess the options. Every company is different, so a one-size-fits-all health plan is not going to be the right fit for most.

Whether you are fully or self-funded there are still some benefits you can add that can impact out-of-pocket costs for your people. Benefit navigators help employees make better decisions when it comes to care and cost. They ensure that a provider or facility is in-network while also searching for lower-cost alternatives. Some benefit navigators also assist in reviewing bills for accuracy and negotiating savings.

Hospital financial assistance is another underutilized tool that can result in savings. Nonprofit hospitals offer income-based financial assistance, that can even apply to households where multiple people are gainfully employed and have coverage. The eligibility threshold is oftentimes up to 400% of the federal poverty level. In hard numbers, that means a family of five with $125,000 a year in income may qualify for assistance.

Related: Open enrollment revisited: What advisors and HR can do differently next time

The average family premium has increased 14% per year over the past 20 years. The rising cost of health care is simply not sustainable. And the CAA may be a catalyst for the necessary change that this country needs.

The CAA will pull back the covers on the normally opaque world of employee benefits, including the costs and commissions paid to middlemen. This new light will expose excessive fees and force everyone involved to pay close attention — a positive thing for an industry with out-of-control spending.

Michael Waterbury is CEO of Goodroot, a community of companies reinventing health care one system at a time. Steve Palma is president of Sola Health, a Goodroot community company that delivers next gen health plan experiences.