EP428: Do-It-Now Advice From the J&J and the DOL v BCBS Lawsuits, With Julie Selesnick

[00:00:00] Episode 428, Do It Now Advice from the J&J and the DOL versus BCBS lawsuits.

[00:00:11] Today, I speak with Julie Selesnick.

[00:00:23] American healthcare entrepreneurs and executives you want to know, talking. Now what? 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

[00:01:40] with fiduciary responsibilities. I want to get to this interview quickly, the conversation

[00:01:45] with Julie. So this intro is going to be on the short side. all covered entities that youth plan sponsors paid more than $1,000 to. 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.

[00:03:01] And the brokers slash EBCs who that make all of this and more possible. But I got off track. What I was talking about is the things thatless Health Value. Thank you. Thank you for having me. So we have two interesting legal cases afoot right now.

[00:05:40] The first one is the J&J case and then 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. If anyone is interested in how that actually happens from the pharmacy

[00:07:00] plan sponsor standpoint, the show with Luke Slindy gets into that in great

[00:07:05] detail, but I

[00:08:23] think as this case illustrates, similar to the J& 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

[00:09:40] is originated under your plan and look at it and make sure there is no hidden taxes Certainly it's things the plans never agreed to, but in these TPA agreements, they sort of 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?

[00:11:03] And the TPA will likely say, well, I'm going to renumber what you said there in my 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.

[00:12:21] The CIA, you know, one of the things

[00:12:22] that said is that these gag clauses

[00:12:25] are foreboden.

[00:12:26] However, you still have these gag

[00:12:28] clauses showing up.

[00:13:25] 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.

[00:13:29] But it's very difficult to take that first step.

[00:13:31] But cases like this will make it easier.

[00:13:33] And also just showcase the hazard of not doing so.

[00:13:36] So we've got number one, get your data, which may be intertwined chicken and egg kind of

[00:13:42] way with the second thing that you said, which is renegotiate those administrative services It should. And 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

[00:15:00] $1,000 or think they will in that of sending out the RFP and then also selecting the vendor, and if it turns out that broker is demanding things, you've got this EBC who's like every

[00:16:21] script I get $4, I get $6, I get $13, if nothing else. 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, but how did this not come out?

[00:17:43] How did J&J wind up with a vendor that's charging $10,000 more than necessary for a generic if you use your insurance versus if you don't. So 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

[00:19:02] these rebates to keep them?

[00:19:04] And do you even know what they're getting in rebates

[00:19:06] and why your plan 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,

[00:20:21] like the sickest people on any plan,

[00:20:23] are really subsidizing a plan.

[00:20:25] This is kind of what he's talking about there,

[00:20:27] because then that rebate goes back 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? Like so if you have

[00:23:01] a benefit consultant or somebody in the mix here, 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 sort of 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

[00:23:06] with the entire field.

[00:24:22] And all of the carriers signed contracts with them

[00:24:25] agreeing to just pay their rate.

[00:24:27] And when plans try and carve out, 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 to make sure it's what they're supposed to be doing. And another piece of advice is like cross plan offsetting. This goes on in almost still the majority of health plans, even though the Department of Labor

[00:25:40] couldn't make it any more clear

[00:25:41] that this practice violates ERISA.

[00:25:43] Several courts that have heard it

[00:25:45] have found it violates ERISA,

[00:25:46] and you're allowing 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

[00:27:04] about just how difficult it is for her to get a needed specialty drug. I guess, is how I would put it. 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. And it's not going to saddle participants with a balance bill. It's not always just a slam dunk, the ass you carve everything out. But these are things that plans should certainly good proper fiduciary process you consider. What are our alternatives?

[00:28:21] Can we carve it out?

[00:28:22] What are the throws?

[00:28:23] What are the cons?

[00:28:24] And assuming that you have a non conflicted competent vendor, then you make the decision

[00:28:28] based on that. 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

[00:29:42] up short. So they take your money and they apply it over there, whatever else they're

[00:29:45] doing, anything that they're doing, if advisors' names were in those cases, right? Like you read the complaint, there are names in there. Oh, yeah.

[00:31:00] If I'm an advisor and I'm listening, what's your advice for me?

[00:31:03] My advice is don't get your name in one of these complaints and figure out how to stop

[00:31:08] this from happening. them, we're not going to let you place our line, our products anywhere. We're going to pull your appointments. 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.

[00:32:20] This is the prevailing model.

[00:32:22] So it's not like any one of these companies named in a complaint is just some evil company 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 or record. It doesn't necessarily mean that they've eliminated all forms of indirect compensation,

[00:33:41] but just being more clear at the outset would be a huge leap forward from where we currently are

[00:33:46] so that plans can make an informed choice. or not pushing back on formulas you don't understand and you're allowing sort of huge cash incentives to be paid, then 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, there's already the allegation in the Johnson and Johnson complaint against the employer that perhaps they should have

[00:35:02] used a non-conflicted advisor.

[00:35:04] It's a factual issue for now,

[00:35:06] but this is going 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

[00:36:20] by giving them the tools they need to be better fiduciaries.

[00:36:23] So you start at the beginning.

[00:36:25] The very first thing you do is, how people get elected to the committee, how often there are elections, if there are other people with delegated authority off of

[00:37:40] the committee, who they are and what they can and can't do, sort of setting out

[00:37:44] very clearly the roles and responsibilities of this committee.

[00:38:41] to run a health plan. For instance, we're talking about data analytics

[00:38:43] and claims review.

[00:38:44] Most companies just, this is not an ability

[00:38:47] that any of us have.

[00:38:48] And so you do need an expert for that.

[00:38:49] And luckily, there's a lot of great analytics companies

[00:38:53] out there, just don't use your CPA.

[00:38:55] Then there's gaps and things like specialty vendors.

[00:38:57] But once you get going,

[00:38:59] then those things start to become clear.

[00:39:02] The one-on-one advice is get the committee,

[00:39:04] get the charter, get's through that lens. 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

[00:40:22] prudent and loyal? What is self-dealing? What is a prohibited transaction?