[00:00:02] Stacey Richter: Episode 428, "Do-It-Now Advice From the J&J and the DOL v BCBS Lawsuits ". Today, I speak with Julie Selesnick. 

American Healthcare Entrepreneurs and Executives You Want To Know Talking. Relentlessly Seeking Value.  

This show is different. So if you've already listened to or read all about the gory details of the J&J and/or the DOL versus BCBS lawsuits, this is not going to be a repeat of that information.  

Discussion on J&J and DOL v BCBS Lawsuits

[00:00:47] Stacey Richter: Julie Selesnick, my guest today, does cover the very, very top line about these two cases. 

But after that, we move on fast. Because what I wanted to get to today was not the potential landslide of legal action that may or may not be confronting plan sponsors or payers or even brokers today. I did not want to really even talk about the CAA, the Consolidated Appropriations Act, and its inarguable adjacency here. 

I just feel like there's been a lot of talk about these topics already. What I wanted to get to, and fast, is now what?  

The Role of Plan Sponsors and Brokers

[00:01:22] Stacey Richter: If I'm a plan sponsor, or actually, again, an EBC, employee benefit consultant or broker, now what? What should I be doing and thinking about right now? To that end, I could not have been more thrilled to get a chance to talk to Julie Selesnick, who is an attorney deeply entrenched in helping plan sponsors and others understand and comply with fiduciary responsibilities. 

I want to get to this interview quickly, the conversation with Julie, so this intro is going to be on the short side, but let me just summarize a few of the points that Julie makes during the interview that follows.  

The Importance of Data in Plan Sponsorship

[00:01:56] Stacey Richter: First, we talk about the first step for pretty much everybody. Get your data, plan sponsors. 

But once you have that data, you also have to use it. You can use it to ensure that you're paying claims right, which is what most do. As a result of these two lawsuits, it's also increasingly clear that you also have to use that data to ensure that the prices you're paying for things, like generic specialty meds, for example, are fair and reasonable. 

To get the data now, you may have to renegotiate administrative services agreements, and you might need to take a closer look at the disclosure agreements you're getting as a result of the CAA. And by the way, it's not just brokers or EBCs who have to complete these disclosures. It's all covered entities that Youth Plan sponsors paid more than $1000 to. 

Understanding the Impact of Lawsuits on Plan Sponsors

[00:02:47] Stacey Richter: Then we get into, okay, once you have the data and you've analyzed it, what are some, in general, things that could very well need to happen? And if the reason that they don't happen is because they weren't even considered, then plan sponsors have some risk exposure and the brokers slash EBCs who serve them might have some conflicts of interest. 

And it would be very interesting what would or could happen if a plan sponsor was able to back into those conflicts of interest. Because if data clearly shows that something should be happening and it is not, and it is not even on the docket to be considered, if I'm a plan sponsor, I'm for sure going to be wondering, why? And maybe I'm going to look into that and fast.  

Exploring the Conflicts of Interest in Plan Sponsorship

[00:03:31] Stacey Richter: Listen to the show with AJ Loiacono from two weeks ago for more on some of the more egregious broker slash EBC conflicts of interest, which could explain, potentially, the J&J lawsuit, as well as definitely explains the earlier one in Osceola. And also, by the way, if you're sitting there wondering to yourself, how exactly J&J managed to pay upwards of $10,000 for a drug that can be purchased for cash for something like $50, listen to the show next week with Luke Slindee. We run through the exact pharmacy supply chain machinations that make all of this and more possible. But I got off track.  

The Need for Transparency and Accountability in Plan Sponsorship

[00:04:11] Stacey Richter: What I was talking about is the things that could easily wind up being called for when the data is analyzed. So thing one, carving out specialty generics, especially drugs or infusions from the larger pharmacy benefit manager. 

That's thing one. Thing two, your payment integrity vendor should not be the same vendor who is processing claims. Talk about a conflict of interest. I do not need to be an attorney, and I need to know absolutely nothing about anybody's data to tell anybody who's listening that if you have the same vendor, or two vendors with the same parent company, who are both processing your claims and then auditing their own work, yeah, fix that. 

That's thing two. Thing three is shut down any cross plan offsetting. And we get to this in the show if you don't know what cross plan offsetting means. Lastly, we get into a bunch of stuff that plan sponsors might want to consider as they consider how to administer their plan. For example, setting up a health and welfare committee that has an independent fiduciary expert on said committee. I'm going to say that's a good idea.  

Introduction to the Interview With Julie Selesnick

[00:05:18] Stacey Richter: As I have mentioned, my guest today is Julie Selesnick. Julie is senior counsel over at Berger Montague's Employee Benefits and ERISA Group.  

My name is Stacey Richter. This podcast is sponsored by Aventria Health Group.  

Julie Seleznik, welcome to Relentless Health Value. 

[00:05:35] Julie Selesnick: Thank you. Thank you for having me.  

Discussion on the J&J and DOL v BCBS Cases

[00:05:36] Stacey Richter: So we have two interesting legal cases afoot right now. The first one is the J&J case and then the second one is the DOL v BCBS case. Let's first talk about the J&J action. I'm trying to use legal words, very, very top line what's happening over there.  

[00:05:59] Julie Selesnick: This is sort of the case that everyone's been waiting for, where a participant in a health plan has sued the employer, but really the employer health plan and the plan fiduciaries for fiduciary breaches for the way they're managing the health plan. 

And it is about the prices the Johnson & Johnson plan agreed to pay for various specialty generic drugs. That are allegedly widely available at far lower prices everywhere. The big example is in the early part of the lawsuit is that if you have this 90 pill prescription for a generic drug that treats multiple sclerosis, the cash pay price could be anywhere between $28 and $78, and the plan was paying over $10,000 for that same drug, and that includes a participant cost share amount. 

So, the big allegation is that no prudent fiduciary would ever agree to make its plan or its beneficiaries pay a price that's 250 times higher than the price available to any one off the street.  

[00:06:57] Stacey Richter: If anyone is interested in how that actually happens from the pharmacy plan sponsor standpoint, the show with Luke Slindee gets into that in great detail, but just summarizing what you just said there. 

In the J&J case, J&J is a pharmaceutical company, which I think people have said makes this very sexy as far as cases go. But J&J is actually being sued by an employee who is on their health plan. So in this case, they are a plan sponsor for wildly overpaying for specialty generics to the tune of the cash price is $28 to $78 and they themselves as well as their plan members were paying over $10k. 

Then we've got the DOL, the Department of Labor, v BCBS. In this particular case, what's going on?  

[00:07:47] Julie Selesnick: This case is fascinating to me. So here the Department of Labor has sued Blue Cross Blue Shield of Minnesota for charging a hidden fee. The DOL is alleging what they're doing as a TPA is hiding a state provider tax into claims costs in 370 self-funded plans in a period of four years. The complaint alleges Blue Cross collected $66 million from these plans without them knowing it to pay this provider tax. These taxes were masked as claims costs.

[00:08:20] Stacey Richter: I'm having a conversation with Justin Leader about exactly how and why this can happen, but I think as this case illustrates, similar to the J&J one, this is what's going on, on the ground, irrespective of the how and why, we have a situation where you've got, in the DOL versus BCBS case, you've got somehow or another plan sponsors are paying providers taxes on their behalf. And then we've got in the J&J just wildly overpaying by thousands and thousands of dollars for drugs.  

The Role of Plan Sponsors in Managing Health Plans

[00:08:51] Stacey Richter: So if we're thinking about these two cases together, and if we're thinking about this from the standpoint of a plan sponsor, what are your main takeaways? 

If I'm a plan sponsor should be running through my head right now.  

[00:09:08] Julie Selesnick: If I'm a plan sponsor, I am first of all realizing this is going to be an area where plans are going to have to take a much more active role in managing the health plan. And if you're a fiduciary or a sponsor, that starts and ends with you. 

And so first of all, engaging with the claims data is critical. We've been talking about gag clause removal and the CAA ad nauseam for about three years. Anyone who listens to me, you can't help but hear about gag clauses. But the point of that isn't about removing provisions from contracts. It's so you can get this data, the claims data that is originated under your plan. 

And look at it and make sure there is no hidden taxes in there and make sure that claims are being paid properly in the way that you think they're going to be paid because the contract that you signed with the TPA says it'll be paid that way.  

[00:09:57] Stacey Richter: The first step, if I'm a plan sponsor, that I should be thinking is, wow, I got to get my data. 

And we have had one guest after another on this show and on LinkedIn. If you talk to anybody in the know, they will always tell you the same thing that if you are a plan sponsor, you gotta have that data.  

[00:10:13] Julie Selesnick: But what it shows when you get the claims data and what plans are sort of increasingly waking up to, there are all these terms and provisions in the agreements that the TPAs enter into separately with providers that also affect how claims are going to be paid. 

So when the claims data is reviewed, when it's confusing, it's because those provisions are changing the amount of payment and there's no way for the plan to reconcile that without coming back with follow up questions. And almost uniformly, it's things the plans never agreed to, but in these TPA agreements, they make this blanket agreement to pay according to provider contracts without knowing what those agreements are. 

So going forward, that's going to be a big problem once people are engaging well with their claims data and sussing out these problematic areas. What'll happen is they'll say, hey, why am I paying this? And the TPA will likely say, well, you've agreed to pay according to our provider contracts. And they'll, upon much duress, tell you the provision of the contract that you're paying under. 

And then the plan has to decide, what do I do? Do I breach my fiduciary duty and pay this, or do I breach the contract and object to this and do something about it? The latter is probably the better thing to do if you have no choice. But really the best thing to do is renegotiate your administrative service agreements in the future knowing claims data is going to show things that aren't in your agreement and making sure that the agreement doesn't allow for payment if you don't know what it is. 

The Importance of Transparency and Disclosure in Plan Sponsorship

[00:11:40] Julie Selesnick: The second thing is to make sure you get proper compensation disclosures and that you'll understand if there are any conflicts of interest. And this comes up in the Johnson & Johnson case. There's some allegations about Johnson & Johnson should have known that their broker Aon was receiving indirect compensation from the PBM, although there's not a lot there to tell whether or not they got compensation disclosures or not, what they said, a lot of factual issues with that. 

But that's the second big issue that's going to become more important as we go forward.  

[00:12:08] Stacey Richter: Okay, I'm going to renumber what you said there, in my recap here. The first step, make sure that the agreements that you're signing enable you to get your hands on your very own data. You should have access to it. 

The CAA, you know, one of the things that said is that these gag clauses are verboten. However, you still have these gag clauses showing up. And if you bring it up, and this is something that Chris Deacon talked about in the Who's Suing Who show. But if you bring it up, they're like, well, you're the one that signed the contract. 

You didn't have to. You should have not signed the contract. 

[00:12:44] Julie Selesnick: I mean, that's it's just shocking to me that they do say that. They say even in litigation, that's the position is, well, you signed it. That's your fault. You're the fiduciary, signed this terrible contract we wrote. So that's a pretty bold position and hopefully one that does not in order the long term benefit of the people asserting it because as many plans know, it's difficult to negotiate these contracts and it's difficult to sign a contract that doesn't sign away a lot of your rights. 

So this is one of those problem areas that the CAA really doesn't address. I don't think there's a government solution for this. It has to be a plan powered solution. There just has to be a general agreement across the country to not sign away your rights and to not agree to predatory provisions in the contracts that you sign. 

But it's very difficult to take that first step, but cases like this will make it easier.  

The Need for Independent Advisors in Plan Sponsorship

[00:13:34] Stacey Richter: And also just showcase the hazard of not doing so. So we've got number one, get your data, which may be intertwined chicken and egg kind of way with the second thing that you said, which is renegotiate those administrative services agreements in a way that's coming from a place of knowledge. 

Like you see what's going on in this J&J case, you can see what's going on in this DOL v BCBS case, right? That's news you can use an actionable insight as you contemplate the agreements that you already have the next time that you go to negotiate them. And then the third thing that you talked about was this whole disclosure business. 

We've had a number of shows about the Consolidated Appropriations Act. We had Chris Deacon talking for 30 minutes on just that exact topic. We had AJ Loiacono also talking about that from the standpoint of brokers. But wouldn't these things, let me ask you a leading question, Julie, wouldn't all this stuff be disclosed? 

It's supposed to be the Consolidated Appropriations Act with a disclosure form that discloses all forms of compensation. This stuff should show up, right?  

[00:14:42] Julie Selesnick: It should. If in a perfect world, when you receive your compensation disclosure from all covered service providers to the plan, not limited to brokers and consultants like many interpret it, but the people who don't interpret it like that are Congress and the Department of Labor, by the way. 

So really all covered service providers that make over $1,000 or think they will in that plan year are supposed to make this disclosure. It's supposed to shine a light on the indirect compensation so that plans have enough information to say, is this a conflict of interest? Is this a good vendor for my plan if, for instance, they're receiving a commission by this insurance company to place TPA business with them, then how do I know I'm getting a fair offering of all that there is out there if they're only getting commissions from this carrier? 

I don't think that we're at a place yet where any indirect compensation is a per se conflict of interest. We're not. But we're definitely at a place where indirect compensation has to be brought into the light so plans can understand who is paying these people to make these suggestions to them. And if you get to the point where you realize every vendor that my broker has recommended to me is paying them to do this, then maybe the time comes to look for a different broker. 

[00:16:01] Stacey Richter: And AJ Loiacono brought this up in the podcast talking about this from a PBM standpoint, which is very relevant to that J&J case. And basically his point was, if you have the broker or the EBC in charge of sending out the RFP and then also selecting the vendor, and if it turns out that broker is demanding things that you've got this EBC who's like, every script I get $4, I get $6, I get $13, every single script. 

The Broker, the EBC, is taking a payment and they're able to do that because they make that part of the package that a winning pharmacy vendor is going to have to agree to. This is the case in Osceola in Florida where this exact same thing was going on to the tune of millions of dollars.  

[00:16:46] Julie Selesnick: That's right. The fact of the matter is that most people rely on their broker to present them with a vendor stack of who they're going to use for all of the services they need. 

The broker has a lot of power in that area and that's where a lot of their compensation stems from.  

The Role of Advisors in Plan Sponsorship

[00:17:00] Julie Selesnick: One sort of potential, at least, curative measure to take, doesn't solve everything, but not having the person that is your broker of record conducts your RFP.  

[00:17:10] Stacey Richter: Yeah, and I've talked with Bridget Mulvenna from, she was at Ericsson and she said that exact thing that she said every time she did a pharmacy RFP, she would get an expert, an unconflicted, just third party expert to come in and run the RFP because it's just risk mitigation. 

If nothing else, like you're just making sure that you have an unbiased third party who's making an unbiased third party decision. This is what's going on in the J&J case here for pharmacy benefits. We're speculating wildly here. How did this not come out? Like how did J&J wind up with a vendor that's charging $10,000 more than necessary for a generic specialty drug? 

[00:17:52] Julie Selesnick: Again, there's a lot of factual issues here. And I do want to say that one of the things that's so interesting about this case is it's becoming a growing realization. I need to get my claims data, I need to get my claims data. What you do with the claims data, I still don't think that plan sponsors are entirely clear on. 

I do think there's a growing general understanding that you're supposed to make sure the TPA is paying claims correctly. What I think might have surprised lots of folks is that you're also supposed to be looking to make sure that you're getting good prices. Part of the reason for this is that on the medical side, it's still very difficult. 

Whereas with PBM, it's not difficult. It's much more democratized, the information about pricing. Because we can all go on GoodRx and see what it'll cost us without insurance. There's all these websites now that'll compare the cost at five different pharmacies, the cost if you use your insurance versus if you don't. 

There is more information available and now I think this is the first wake up call that you need to be using it if you're the plan to make sure that your formulary is priced properly and if it's not, then this leads to another question. Is it because of rebates? And if the rebates cause two potential conflicts. 

One, should you be allowing whoever is keeping these rebates to keep them and do you even know what they're getting in rebates and why your plan is paying more to put rebate money back into the PBM's pocket or into the Administrative Service Agreement into that TPA's pocket. But even worse, sometimes the plan is getting the rebates and I don't think anyone's providing them with an analysis when they get the rebate of whether a portion of that should be going back to planned participants who actually bought these drugs in the first instance. There's really a whole hornet's nest of possible fiduciary breaches going on here. And I think this was a surprising first case in its area because it's about the prices being paid rather than are they being paid correctly. 

[00:19:46] Stacey Richter: Yeah, and you bring up a really interesting point that I think many forget about. It's one of those things that's in the weeds that has a big impact, and it makes sense when you say it, but you have to actually think this through to realize it, that planned participants pay a percentage, like if I have 10 percent coinsurance or 20 percent coinsurance, I'm paying a percentage off the list price. 

Not of a drug, not the price after rebate. So if the rebate, everybody talks about the gross net bubble and how huge it is, even if the rebate is huge, the plan participant is not getting any advantage there. And Mark Cuban talked a lot about this and he talks about how the sickest members, like the sickest people on any plan are really subsidizing a plan. 

This is kind of what he's talking about there because then that rebate goes back and it lowers premiums.  

The Importance of Proper Plan Administration

[00:20:32] Stacey Richter: It's a bit intractable. It's a tangled web we weave, but this is what is going on. And I think based on what you just said, Julie, I'm going to edit our number one thing here, which was the get data. 

I'm going to edit this in the following way. You got to get the data and then you have to use it. And you got, you use it not only to pay claims, right? But also to make sure that you're getting good prices. And as you said, on the medical side, it's a little tricky. But on the pharmacy side, there are any number of places. 

NADAC is another one. As I mentioned, I just interviewed Luke Slindee, who is one of the administrators of the NADAC, which stands for National Average Drug Acquisition Costs. There are myriad places, and that's available publicly. We can link to it in the show notes. So there's a myriad of places that one can go to check if the pharmacy prices that the plan is paying seem like it's going to be that plus a dispensing fee. 

But you know, the dispensing fee can't be $9,700 or whatever the delta was in the J&J case. If you were going to just come up with maybe a list of things that don't get recommended when there's not conflict free advice, right? So if you have a benefit consultant or somebody in the mix here who is conflicted, what are some things that maybe don't get recommended so the plan winds up in legal jeopardy and paying way too much? 

[00:21:55] Julie Selesnick: First of all, if you're a self-funded plan. Part of the reason you made the decision to become a self-funded plan was to have the flexibility to design the plan the way you like. You will see that on every website that's promoting self-funded plans, every sort of conversation about them. But in reality, plan sponsors have had very little ability to actually design their own self-funded plans. 

And when they try and put their own vendors into the mix, is faced with a lot of pushback from the TPAs, particularly when their insurance carriers or huge independent TPA, but plans have to do this. It's important. The, the reason that you have the right to carve your own plan and make it the way you want. 

It comes with the responsibility to create the best plan you can that contains the best expenditure of plan assets for the most possible value that you can get. For instance, carving things out is a huge issue and here in the Johnson & Johnson lawsuit, if they've carved out generic specialty drugs, then there would have been, this is what all of the allegations in the complaint are about. 

And so if someone had been looking at the prices and said, Hmm, most of these prices are okay, but when it comes to generic specialties, you guys are way out of whack with the general public. We don't want that part of your PBM offering. That is traditionally met with quite a fight, but this is the job. 

The job, if you're a planned fiduciary, is to not just give in and think that you are at the mercy of the PBMs and the TPAs. You do have options and you have to exercise them. You have to stop accepting no when someone's telling you what you can or can't do with your money and your plan. It's yours. And so if that vendor isn't doing it for you, and particularly for PBMs, there are PBMs out there already that are transparent and they don't keep rebates and there you can figure out what things are going to cost really easily and so there's not really a good reason right now not to already be playing a little bit more hardball with the PBMs. It's still, again, more difficult on the medical side, but even there, there are more and more options every single day to get around the sort of traditional network system that the carriers are offering. 

You need to do this. You know, another example is dialysis. People don't carve this out and it is just wildly expensive compared to what Medicare pays. And that's because there's two companies only that sort of have a duopoly over the entire field. And all of the carriers sign contracts with them agreeing to just pay their rate. 

And when plans try and carve out, the dialysis companies actually sue them. This went to the Supreme Court. There was a case Marietta Hospital System v DaVita and the Supreme Court actually affirmed that self-funded plans can carve things out. That's their right to do that as long as they're non discriminatory. 

So that's a great thing that plans should be advised about is look at all the things you could potentially carve out. Things like dialysis, infusions, certain cancer drugs, specialty generics, things that you're currently paying way too much money for, and there's a general industry wide knowledge of this. 

That's an area where an independent advisor would start helping you carve out. Another area would be you have to have independent claims review going on. You cannot let the fox guard the hen house. Having your TPA perform payment integrity review doesn't meet the fiduciary standard. You need to monitor your service providers. They can't be monitoring themselves.  

The fiduciary goal is that you monitor them and you do that by having a different expert look at what they're doing and make sure it's what they're supposed to be doing. And another piece of advice is, cross plan offsetting. This goes on in almost still the majority of health plans, even though the Department of Labor couldn't make it any more clear that this practice violates ERISA. 

Several courts that have heard it have found it violates ERISA. And you're allowing plan assets to be diverted from your plan and go into another plan or most often an insurance company's pocket. That violates the first duty of ERISA is to use plan assets prudently and only to pay benefits for plan participants. 

So there's a lot of low hanging fruit like that, that if people had non conflicted advisors. They would be telling them from the beginning, you can't agree to this. You can't agree to that. You have to do this. And even just beginning that process would put most plans way ahead of where things are right now. 

[00:26:21] Stacey Richter: You gave three interesting, I'm going to call them strategies, for a plan sponsor. Who is getting unconflicted advice that they're considering that if you're not getting the same advice, I don't know, maybe you should check whether your advisor has any conflicts of interest ongoing because these are kind of like the right things to do. 

They're probably considered best practices. So if you're not getting this advice, you might want to look into it. But the first thing that you said was what's getting carved out here. And you gave a couple of examples of things which are typically very advantageous to be carving out just because there's really good vendors who are doing really great things here. And I mean this in a win win from a patient way also.  

We had Olivia Webb on talking about just how difficult it is for her to get a needed specialty drug. I mean, she's spending hours and hours a month just navigating the logistics of getting the specialty drug. 

And if she doesn't take this drug, then she has an uncontrolled condition. I mean, that's bad for her. It's bad for her employer. It's bad for everybody except the, obviously the vendor who continues to have a process requiring hours and hours of phone calls. But the things that you suggested should get carved out potentially are specialty drugs, which could include generic specialties. It could include infusions. You had mentioned dialysis. The one thing that I would say here is on the flip side, it's really important to make sure that the vendor that is getting carved out business to, the carve out vendor, that the broker doesn't have relationships with that carve out vendor. 

Because, again, same rules apply. It's the right thing to do to carve out, but not all carve outs vendors are created equally, I guess is how I would put it.  

[00:28:04] Julie Selesnick: Absolutely. They could, you know, you have to also make sure in each instance that carving out is in the best interest of the plan, that it's not going to saddle participants with a balance bill. 

It's not always just a slam dunk. Yes, you carve everything out, but these are things that plans should certainly good proper fiduciary process. You consider what are our alternatives? Can we carve it out? What are the pros? What are the cons? And assuming that you have a nonconflicted competent vendor, then you make the decision based on that. 

[00:28:30] Stacey Richter: Number one, carve out, don't carve out. Well, let's just put it this way. Consider the carve out. Think it through. Analyze. So that's number one.  

Number two is have somebody else besides the vendor processing the claims, audit the claims. And this is something that Dawn Cornelis has talked about at length. And keeping in mind also that a lot of the claims processors have another division that does claims auditing. How's that going to work? Right? Really?  

[00:28:53] Julie Selesnick: Dawn and I are kindred spirits on this and the idea, not only that you're gonna let the same company that processed the claim review it, but the more egregious part is that if they find a mistake that they made, they will then take a savings fee for fixing their own error. 

Stop paying for this, fiduciaries. That is not an acceptable cost.  

[00:29:13] Stacey Richter: Yeah, that's crazy. You just think about the perverse incentives there. Just like how much can I mess up so that I can get paid another fee to fix what I messed up. So that's number two. Payment integrity should be a third party thing. And then the third thing that you mentioned is to really be careful with this cross plan offsetting. 

And as you said, cross plan offsetting is when your TPA or your carrier takes money from your plan, and then it uses it for other purposes. There's another plan that's coming up short. So they take your money and they apply it over there, whatever else they're doing, anything that they're doing. If they are taking your money from your plan participants and using it in a way that does not benefit your plan, then that's like the definition of a fiduciary breach. 

[00:29:59] Julie Selesnick: And they're doing it really because the problem is they say, well, we overpaid the provider for a different claim under a different plan. So even though this claim is approved, we're going to divert that payment that should go to this provider and put it back in the pocket of the plan or policy that made the overpayment. 

Well, a lot of times that's the insurance company that is administering your claims. Which is just, to me, I can't think of a bigger instance of self dealing than that. But also, as a fiduciary, your money should only go to pay your plan's benefits, not to other plan benefits.  

[00:30:31] Stacey Richter: Let's turn this conversation over to advisors, because I'm sure there's a lot of advisors that are listening, and I'm curious whether you have any advice for them. 

And I'm kind of saying this because in all of the aforementioned cases, I am pretty sure, maybe not the DOL one, but maybe, for sure the J&J case, that Osceola case, the advisor's names were in those cases, right? Like you read the complaint, their names, their names in there. Oh yeah. If I'm an advisor and I'm listening, what's your advice for me? 

[00:31:05] Julie Selesnick: My advice is don't get your name in one of these complaints and figure out how to stop this from happening. There's also adding the Kraft Heinz complaint v Aetna. They also mentioned the broker, the advisor, sort of being an obstruction rather than assisting them in getting their planned claims data and feeling like the advisor was more on behalf of the carrier than on their side. 

This is the conflict. This is the problem, is when you are getting paid on both sides of a transaction is very difficult to know where your loyalties lie and what you're supposed to do when a conflict arises. So we're here, we're at the crossroads of I have accepted the compensation and now we've got a conflict. 

My plan wants their data and the carrier that gives me commissions doesn't want them to have the data. And here's what happens when you have a conflict is the carrier will say, you know what, if you cooperate with that plan, or if you do anything to assist them, we're not going to let you place our line, our products anywhere. We're going to pull your appointment. And so that's a big threat to hold over commission paid people. It often results in a decision to act as a gatekeeper rather than assist the plan in getting their data. So if you're an advisor, this is a hard business model to break out of. This is the prevailing model. 

So it's not like any one of these companies named in a complaint is just some evil company acting different than the others. That's been the sort of status quo. But I would also say there's a lot of independent advisors out there now and even advisors with some large companies that are changing the way they do business. 

And at a minimum, you need to lead the way on making clear, transparent disclosures if you're an advisor so that your clients understand where all your compensation is coming from. And you're not hiding the ball in any way. If you're clear on it and the plan still then chooses you, they know the risks now. 

That's different than the current setup where they're unwitting participants in this. If a plan knows what you're being paid and who's paying it and they still choose you, well then I do think that sort of that's on them at that point. You should also assist your plan in obtaining the same disclosures from all their other service providers. 

Giving nonconflicted advice, however, is something you really can only do if you have no conflicts. And so, you need to advise your plans of how to protect themselves, how to minimize risk. Maybe advise them, hey, don't use me to run your RFP if I'm your broker of record. It doesn't necessarily mean that they've eliminated all forms of indirect compensation, but just being more clear at the outset would be a huge leap forward from where we currently are so that plans can make an informed choice.  

[00:33:49] Stacey Richter: And from what I'm understanding, you say that the days of making a lot of money off of secret payment streams coming from clients unbeknownst to the client are probably coming to an end. So you can either be ahead of that curve or behind it. And being behind it might get yourself on a named in a lawsuit.  

[00:34:13] Julie Selesnick: That's right. And that's a lesson from the 401k space is if you stay behind the curve for too long, then you're the focus of the excessive fee litigation or the improper fee litigation. 

It's not going to unfold exactly the same as it did in the 401k space. But if after all of this transparency, as we go down this road and things become more readily available, and there are more independent vendors in this space advising plans what to do, if you are now not getting good disclosures from your advisor or not pushing back on formulas you don't understand, and you're allowing sort of huge cash incentives to be paid, and you're likely to be a future defendant in one of these actions because your plan participants at some point are going to think that you are... it is already the allegation in the Johnson and Johnson complaint against the employer. That perhaps they should have used a nonconflicted advisor. 

It's a factual issue for now, but this is going to become more common. And if you look back in 2005, sort of, I guess it was the attorney general's office and Elliot Spitzer was sort of, this was a huge issue. And a lot of the same big brokers today paid massive settlements, $890 million, $190 million for this very same behavior, steering clients into specific insurance plans.  

[00:35:32] Stacey Richter: Back to the employers right now. So I'm putting myself into the shoes of a plan sponsor who's thinking about my plan in its entirety. We're at this place where I feel like we need to really rethink at the highest level how we're administering a plan because we can't forget that a lot of HR teams, they didn't go to HR school to learn how to run an insurance company off the side of their desk. So what advice would you give as we're thinking about administering the whole plan?  

[00:36:04] Julie Selesnick: Okay, so this and this is a great time to be doing this. There's no need to sort of panic. There's not going to be some wave of lawsuits tomorrow where every self-funded plan in the country is going to be sued. But this is a wake up call. There's been a spate of laws over the past few years, and they're all aimed at increasing the accountability on planned fiduciaries by giving them the tools they need to be better fiduciaries. 

So you start at the beginning. The very first thing you do is, if you don't already have one, establish a fiduciary committee for your health and welfare plan. Ensure that the plan sponsor determines who will be on that committee and delegates the sort of decision making authority to the members of that committee. 

The very next thing you should do is buy fiduciary liability insurance. If you're asking individuals, and you make a great point, Stacey, a lot of people that are making fiduciary decisions, this is not their career goal is to run a health plan. This is not what they went to school for, and now they're being asked to be a fiduciary and accept the liability that comes along with that if they do something wrong. 

And so as a company, if you're going to ask this of people, you really need to provide insurance to indemnify them if something goes wrong. You also need a bond because things sometimes go wrong because of misappropriation. And that can happen from vendors from outside your company. It can happen a lot of chains of the way. 

So it's not just the fiduciary liability insurance, but the bond to cover your plan in case there is a theft of asset. Then you need a committee charter so that it's pretty clear how decisions are made, how often the committee meets, how people get elected to the committee, how often there are elections, if there are other people with delegated authority off of the committee, who they are and what they can and can't do. 

Sort of setting out very clearly the roles and responsibilities of this committee. And then that committee has to have regular meetings, at least quarterly, but potentially more than that at the beginning until people, the committee at least, has a handle on how their health plan operates and is a little more conversant in health plan language and what's going on. 

It might need to be more than quarterly for the first year and something that I see becoming more popular and I think it's a great move is maybe hiring an independent fiduciary to sit on your committee and help guide what the committee should be considering at each stage. Making sure that there is some sort of fiduciary checklist and at least limit liability and ensure that the plan is thinking about everything they need to be thinking. 

And then just the next step is hiring all of the service providers that are necessary to fill the gaps in the committee's knowledge or abilities to run a health plan. For instance, we're talking about data analytics and claims review. Most companies just, this is not an ability that any of us have. And so you do need an expert for that. 

And luckily there's a lot of great analytics companies out there. Just don't use your CPA. Then there's gaps and things like specialty vendors. But once you get going, then those things start to become clear. The 101 advice is get the committee, get the charter. Get the members and start.  

[00:39:08] Stacey Richter: Summing up the first step, get a health and welfare committee that is kind of like your fiduciary committee, create a charter that committee also should probably include an independent fiduciary who can help everybody understand where the gaps are in knowledge. 

I could also see how if you had an independent expert in fiduciary, that individual could also help train everybody else on how to be a good fiduciary and keep everybody up to speed on what was going on. So that's number one and number two. Number three, make sure that you have proper insurance for everybody so that they are indemnified. 

That would seem fair. Number four, you'd mentioned getting a bond. Number five, I'm going to state this maybe slightly differently. Create a culture that understands ignorance is not bliss, that understands that there's all of this going on. I have said many times that the healthcare industry, the insurance industry has been financialized. 

Create a culture that really fundamentally understands that so that when you get started, it's through that lens.  

[00:40:10] Julie Selesnick: You made a good point, a great point about fiduciary training. Everyone who's appointed to a committee or is given fiduciary authority should be trained in what it means to be a fiduciary and what their duties are and what are conflicts and what does it mean to be prudent and loyal. 

What is self dealing? What is a prohibited transaction? You also need to make sure that none of your own internal fiduciaries have conflicts of interest or engage in any self dealing, or if so, that there's an exemption that applies. So there's a lot of subcategories that come, but definitely you can't just stick people on a committee and say, you're poof, you're a fiduciary without then providing fiduciary training and ensuring that they know what they're doing. 

And the more able you are to make better decisions. Yeah, very good.  

[00:40:52] Stacey Richter: Julie Selesnick, is there any place that you would recommend people go to learn more about your work?  

[00:40:58] Julie Selesnick: Well, you can go to my website, and that healthcare and benefits law group discusses some of the consulting work we do, or you can just follow me on LinkedIn because I am forever yammering on about gag clauses and other fiduciary obligations and just feel free to reach out if you have any questions or want to know just where to start. 

[00:41:18] Stacey Richter: Julie Selesnick, thank you so much for being on Relentless Health Value today.  

[00:41:21] Julie Selesnick: Thank you so much for having me. It was a real honor and a pleasure.  

Conclusion and Final Thoughts

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