Regulatory Reality Check for Employers

Speaker A: Today on, um, the Benefits Breakdown, the team's joined by Jesse Campbell, who leads our national practice for our Brown and Brown regulatory and legislative team. We look at all of the regulatory uncertainty for group health plans. We talk about GLP1s and things to consider for employers from a compliance perspective. Dive deep into tobacco surcharges, artificial intelligence, and much more. So let's have some fun, and let's get into it. Welcome to the Benefits Breakdown. Let's.

Speaker B: Hello, hello and welcome to another episode of the Benefits Breakdown. Vanessa Longnecker here with adam and team Ms. Vanessa.

Speaker A: Good day, good morning, good afternoon, good evening, good night, whatever it might be from the Truman show back in the day. Good to see you, Jesse.

Speaker B: Are you ready for some fun?

Speaker C: I am. Compliance is always fun.

Speaker A: Well, let's not present any legal or tax advice. We can be the full disclaimer if we want. But we're going to welcome Jesse Campbell, who helps lead our employee benefit compliance practice team Reagan Leg. We've got lots of names. Whatever you are, we are just, number one, excited to you that you joined us here in the Benefits Breakdown. Thanks for joining us today.

Speaker C: Thanks for having me.

Speaker A: So who are you? If we could a little bit in the brown and brown space, and then maybe if you don't mind something fun outside of the brown and brown space, that makes you a real life human being.

Speaker C: Okay. So I am the national practice leader for our regulatory and legislative strategy group, which is a mouthful. So we typically refer to ourselves as Reg Leg or employee benefits compliance. We will respond to any of those names.

Speaker A: AU Yep.

Speaker C: Um, I have been a health and welfare compliance or health and welfare consultant focusing on employee benefits compliance for over 20 years, uh, and excited to help customers and develop their employee benefits plans, strategy design in a compliant manner.

Speaker A: And then outside of work, do you do anything fun or do you just read legal briefs before bed every night and on the weekends?

Speaker B: Come on. That's not fun, Adam.

Speaker A: I guess it could be. Just depends on your perception of fun, Vanessa.

Speaker C: It helps you sleep, that's for sure. Outside of my role here, I have three kids and two dogs. So a little bit of chaos in just terms of, you know, shuttling them there at their places. Right now we are wrapping up a very busy hockey season, but the end is in sight. And, uh, we're excited for some spring or summer, like, weather here. I'm based in New England, so send any warm weather my way.

Speaker B: Fellow hockey mama at heart here, I'm excited to kickstart some of the fun with you and to get Us going today. I cannot overlook the fact, like the number one thing we're talking about with all of our customers these days, obviously, aside from managing and balancing financial impacts and epically high, um, trends as a marketplace in its entirety is regulatory impacts, fiduciary liabilities. I'd liken it to the days of 401, right. When we saw a massive market shift. Can you tell us a little bit about what you're seeing, hearing and shaking in that world as our listeners tune in today?

Speaker C: Absolutely. You're so right, Vanessa. This is something that all of our customers are talking about. Um, the ERISA fiduciary duty litigation has historically targeted the 401k space, but it's the same legal theories, the duty of prudence, duty of loyalty, uh, prohibited transactions that are now being applied to health plans. Um, you know, I may sound cynical, but I think a lot of what's driving it is it's a potentially significant revenue source for law firms that may have tapped out of it on the retirement side. Um, but we are continuing to see a lot of litigation focusing on health plans. Whether it's the, the fiduciary, um, of the group health plan, the tpa, who's acting as a co fiduciary of the health plan, um, they're kind of coming at it from all angles.

Speaker A: I think as we round that into some discussions around the fiduciary aspect further and some other things that we've seen, I think employers more than ever just might start with what do I do? And I don't care if you're small mid national jumbo, there's sometimes you throw your hands up. Uh, if you're sitting in the shoes and you've been at those tables so many times, how do you begin these conversations with that uncertainty in the market? And how would you look at that in the employer's view or their lens to try to get their hands around all of the different things? I'm sure they can't gobble it up in one 20 minute meeting. This has to be a broader sort of discussion.

Speaker C: Yeah, I mean, I think a lot of times on the employer side, who's in HR and benefits, they're so well versed on their duties on the retirement side, and it's really translating a lot of that to its applicability to the group health plans and other ERISA benefits. It's not limited to health plans, although that's certainly been the focus of lawsuits, but it's kind of any ERISA health and welfare plan, these same principles apply to um, you know, we work with our customers to first help them understand what are those fiduciary duties and what are the best practices that they can employ to ensure compliance. A lot of those are really common sense and they're things that employers are doing already in terms of marketing their programs at ah, a set frequency, um, ensuring that the contract terms are protecting, uh, the employer and their plan participants and that the vendor is following through on those contract terms. Um, being aware of the compensation that is tied to these plans and that that's fully disclosed to them. Um, so it's likely things that for the most part they're doing today. But do they have that formally documented? Likely not. And that's where I think there could be a gap and some exposure for them if they were, if it was called into question.

Speaker B: Such a fair point. Right. The reality is many of our very prudent plan sponsors are doing much of what we would argue are best practices, right? Added lift, documentation, formalization, potentially benefit committees. All things you're hearing and we're seeing come into play. If I'm a listener, right, if, and maybe I have had some turnover or I'm feeling a little uneasy, what are immediate action items that you'd want me to know specific to this that I should be documenting?

Speaker C: So I think starting as you mentioned, ensuring that you have a formal benefits committee, what are their roles and responsibilities, who's a part of it, um, and ensuring that you're presenting recommendations to that committee, all of the notes are maintained and documented. Uh, looking at your benefits plan. When was the last time you marketed those plans? Plans? If you've had the same carrier for the last 10 years and you've just renewed as is probably a time, a good time to do your due diligence and market that to ensure that the fees, um, are what you, you know, what you should be getting in the marketplace. Um, benchmarking those fees is really important and maintaining those um, documentation of that for some of our larger uh, self funded groups, claims audits can also really um, go a long way to ensure that the plan is operating in the way that uh, the plan terms dictate. And also when you do that, all of this again back to the compensation. Ensuring that you, when you're in the. I'm an employer sitting in the employer's seat and I'm marketing my plans, ensuring that I know all of the various components of the compensation that is tied to my plan. Because at the end of the day as a fiduciary, I need to ensure that Everything that's done is to benefit plan participants. It cannot be done to benefit the

Speaker A: employer when the market's changing too. The, the markets are reacting to these sometimes arguably lower loss ratios and I think reacting to build rules in the plan to help drive that up, hopefully creating more of an active consumer to make these, these policies, products, whatever you want to call them, used and I think to your point, document them. Um, and I joke because we just had a seminar recently with another teammate where I think this was its own 45 minute conversation. There's a lot of pieces that we can do and documenting or things that we can talk through seems to be a huge piece. Um, as you look through that, I guess next step inside of the fiduciary, is there anything that's on the horizon that, that you're watching out for, that, that you're looking out for in the next months ahead that employers can keep an eye out for?

Speaker C: I think to date the focus of uh, these lawsuits has really been on health plans. Um, however in late December there were four nearly identical ERISA class action suits filed, uh, against large employers and their benefits brokers or consultants. I will state that Brown and Brown was not one of them that was named. Um, but the focus of these lawsuits is voluntary benefits. Um, and voluntary benefits are typically paid 100% by employees. And the focus is whether or not the loss ratios, as you said, um, these are just revenue generators for the insurance company when they are fully funded by employees. So benefits like accident, critical illness, cancer, hospital indemnity, um, these are, have um, traditionally been assumed to be outside of ERISA under the DoL's Voluntary Plan Safe harbor. I think that's a really hard argument to make these days given that employers typically communicate these benefits as part of their overall benefits package. They are including them in employee open enrollment communications. They, they are placing the enrollment of these benefits on their benefits enrollment platform right after their medical plan enrollment. If you're doing those things, it's really hard to make the argument that you satisfy that plan safe harbor. And if you don't satisfy it, it's an ERISA plan, which means it should be in your 5,500 the compensation that should be disclosed. You should be reviewing the experience of those plans and ensuring that it is a reasonable loss ratio. Uh, you should be marketing them at a certain frequency just like any other benefit that you're offering.

Speaker B: Which I, you know, this is an excellent point which I think is actually radically shifting some of how the market. Right. That represents these products. Um, they've Been innovating. Right. So it is interesting right to see we've got shared incentives, we have different uh, pooling models that are evolving. Uh, the reality is these products are very meaningful. Right. So the last thing the industry or the consumer wants is for these to be um, shed with a negative lens. But it's how you place them and how you do you balance the rigor as these products evolve that then gets back to that fiduciary opportunity. So not letting any products is the reality. Sit the bench, uh, in your due diligence process, documentation and review is a meaningful and critical component. I would argue with that in mind Jesse, thank you for sharing that. You know another interesting one that I don't know about you Adam, but I've heard quite a bit. Right. And it falls into a similar camp as a fiduciary is how plans are managing what we've been talking about as a buzzword in the marketplace, but it's had a massive influx of spending is GLP of ones. Right?

Speaker A: I've not heard of those before. Is that something that's impacting the marketplace?

Speaker B: Massively expensive and pretty much rapidly available to every consumer. So plan sponsors obviously faced with big and excess dollars and you know, hopeful for some ROI long term. But these are, this is new new spend to the system, um, in, in the short run and yet to be determined. But the reality is they're game changers for many consumers. So plan sponsors are struggling with how to most effectively manage that spend and support their workforce in that desire. So some I would say are creatively using direct to consumer pathways, ah, alternative funding vehicles. Jesse, I am sure this isn't new to you, but what have you seen here or any words the wise on as a fiduciary, how I manage this as that has evolved.

Speaker C: Yes. I mean we can't have any discussion about employee benefits these days without talking about GLP1s. Um, and it's such a rapidly evolving space. I feel like on a weekly basis the landscape is changing to some degree. Um, initially I think the strategy was really focused around excluding, excluding GLP1s for weight loss for coverage or putting barriers in place. And those approaches come with their own kind of compliance considerations. But I think those have not been, don't pose as much of a risk. I think those are pretty mainstream approaches, uh, to address GLP1 spend for weight loss these days, um, with the direct consumer options we are seeing employees trying to find ways to leverage that. Right. So most commonly it would be excluding coverage from the group health plan itself. And directing employees to a direct to consumer program and helping them with the cost of that drug. So setting up some sort of subsidy on a monthly basis, whether it's covering, you know, all of the costs, 50% of the cost, um, some degree to help them cover that direct to consumer, consumer expense. When you do that, uh, you're essentially creating a health reimbursement account or HRA. And HRAs have a host of compliance requirements on their own. And I think this is often overlooked in the setup of these direct to consumer programs. When the employer is providing a subsidy, it's really important that employers be aware of those various compliance requirements, such as having a plan document for the hra. COBRA applies to hra. One of the kind of most impactful pieces I think that employers should be aware of is that an HRA is going to be considered disqualifying coverage for HRA purposes. So if you are an employer who's looking to offer one of these, uh, programs to employees who are enrolled in a qualified high deductible plan, you want to make sure that that reimbursement isn't applying until after the IRS deductibles are met. Some employers are saying, you know what, we're just going to only align this with our non high deductible plan, uh, just so that we don't have to deal with that additional complexity. Uh, but just something I think it's important to call out because I have seen it be overlooked.

Speaker A: The dream would be for it to be simple. You write a check, you pay some dollars, it comes out that way. But I think as you've elevated here and we've seen historically, uh, the compliance aspect is something important to call out because something simple that might make sense needs to be rethought of. Uh, and Vanessa, I'm just going to say what I think we've constantly said through the benefits breakdown history. I'm very thankful to have teammates like Jesse who can help guide us through these things because they are just so complex and over time. And if we're sitting here with a crystal ball, you can almost imagine that things are going to evolve and change and people will look at this as we go. Uh, for GLP1s that will continue to be, uh, in our world nonstop or unless you think that maybe we'll start talking about them. But I don't think we're going to,

Speaker C: not anytime in the near term. And I agree. I wish it was simple. Employers are trying to do a nice thing, right? Like instead of just simply excluding coverage for weight loss, GLP1s. They're trying to help employees with the cost in that direct to consumer manner. Which is amazing. Right. If they're able to, to do that for their employees, um, we just want to make sure that they're doing it in a compliant way.

Speaker A: That's right.

Speaker B: You know, I think everyone, at the end of the day, they're trying to manage spend in unique ways. And I would say on the heels of one of the largest right. Trend increases, um, financial pressure renewals we've seen in likely decades. Right. If we're being honest, as healthcare systems evolve, grow, reimbursement models are shifting. With an aging US uh demographic, there are a lot of layers. Right. So GLP1s are just one of many kind of carve out or creative solutions that we see obviously impacting the uh, reg lag space. Another right age old, but with finances, the focus concept that employers have leveraged would be things like a spousal surcharge or a tobacco surcharge. And whether that, you know, tobacco, whether smoking's, you know, sitting's a new smoking or otherwise. Right. These types of concepts also come into play in this dialogue and with more scrutiny right around that fiduciary liability. Any other words of wisdom here for our listeners as they're evaluating concepts and philosophy fees for their coming renewals or current.

Speaker C: Yeah, that's a great point, Vanessa. Um, things like tobacco surcharges, these aren't new strategies. Um, they've been in play for quite some time and I think there are some employers who are looking at them for the first time as a way to reduce net plan spend. Um, tobacco surcharge, however, is an area where we've seen a huge increase in litigation over the last couple of years. Um, I won't go into the weeds of HIPAA non discrimination rules, but one of the requirements is that the full reward be available to all similarly situated participants regardless of when the activity is completed. So in the instance of a tobacco surcharge program, that reward is just the removal of that surcharge. But if the employer is not removing it or refunding it retroactively to the beginning of the plan year, that's the most litigated issue in this area. So plaintiffs are arguing that when an employee completes their tobacco cessation program mid year, the plan has to retroactively refund them any surcharges paid to date, as opposed to just stopping the surcharge on a go forward basis. The courts are split in terms of the decisions. Some are erring on the side of the plaintiffs and, and ruling that, yes, that should be a retroactive refund in order to make that person whole. Others are not. That said, um, if the lawsuits are surviving that dismissal stage, it typically encourages the employer to settle. And the settlements that we've seen over the last year or so are very substantial dollars. So kind of from a conservative standpoint, I think refunding the surcharge back to the beginning of the plan year is going to remove that litigation risk going forward. The other piece that seems really basic is again around communication of the components of the plan. So, so under hipaa, uh, you have to have a reasonable alternative standard for a tobacco cessation program. Again, typically, just a tobacco. For a tobacco surcharge program, Typically that's just a tobacco cessation program. But that needs to be announced. The availability of that program needs to be announced. In every communication piece that talks about the wellness program, a lot of these lawsuits have identified employers who either one, don't have a reasonable alternative standard or who are just simply not communicating it, um, or they're communicating it in a way that's not clear to employees or isn't giving them enough advance time to comply with the requirement. So from an employer perspective, really ensuring that you have that in place, that you're communicating it in a clear and concise manner, um, and that employees are kind of aware of the program details and that kind of just, it's not being buried in all of the other, um, details of, uh, your benefits program.

Speaker A: Fun with hipaa. Hey, Jesse. Knock. Uh, knock.

Speaker C: Who's there?

Speaker A: Uh, hipaa.

Speaker C: HIPAA who?

Speaker A: I can't tell you. Uh, that's a compliance joke for you.

Speaker C: That was really good.

Speaker B: I like that.

Speaker A: You know, it's just, it's the joys of hipaa. But it outlines the importance. Importance. Gosh, that's so terrible. Um, it outlines the importance of just these little things that are so, uh, detailed that people are going to try to find those gaps. How do you best control that? I think you've outlined just a couple of those key things to make sure it's a part of all your communications. Uh, don't overlook this and really dive into those, those key pieces. M. As you look into the future, I know there's a lot of things. And even on the heels of our market trend report that we just launched, I know you had a huge part of that which talked about a lot of these different rules, from tobacco to uncertainty to fiduciary to GLP1s. You know, there's A lot of things on the horizon that might even be in the AI space, the artificial intelligence space, um, as we look forward. Any sort of final thoughts or words that you might want to share? Not necessarily on that, but you're, uh, that you're seeing in the marketplace that you might share with the listeners?

Speaker C: Yeah, I mean, I think in general there's just a lot of uncertainty right now. Uh, one of the things that's driving that is the Loeb or Bright case, which overturned the Chevron doctrine. So to back up and tell you what those terms mean, the Chevron doctrine required federal courts to defer to a federal agency's kind of reasonable interpretation of any statutory provision. That, that was ambiguous. Um, and we know that oftentimes the statutory provisions are extremely ambiguous. Um, the Loper Bright Supreme Court decision, which was in 2024, overturned that. And what that means is now the courts can exercise their independent judgment when determining whether a federal agency has overstepped its statutory authority. Um, FAQs, bulletins, informal agency opinion letters, those really can't be relied upon anymore. And it's, you know, we've seen the impact already on a couple of regulations that have either been vacated or put on hold. We expect that will continue. And I think what's difficult for employers not only is trying to predict which regulations this could impact, but also the compliance risk profile is going to depend on the jurisdiction in which this dispute arises, because it's going to be up to that court to make their own determination. Um, so if the same argument is heard in two different courts, you could have two different outcomes.

Speaker A: I'm just going to call out, and I know we're going to probably wrap up with time, but even that term risk profile, we talk so often about the health of your health plan or your employee benefit risk in general, as, you know, people or people that join your plan and all the things that make a successful plan or not, I think we're ingrained in that risk profile from a compliance perspective is a real thing. And I think we need to look at that of, you know, am I by just nature of our business, more likely, do I have more restrictions? Do I have more complexities? And you almost have to retrain the brain to say that I might be at a greater risk. But it doesn't mean you need to go jump in through a million hoops. Just have to start to really think about it. Maybe to your point to round out the front end was build the committees, write it down, have those plans in place. So thank you for outlining that.

Speaker C: Oh, you're welcome. At Echo Adam.

Speaker B: Um, I mean, we could talk for hours. This is awesome stuff. But man, we appreciate you and all you do on behalf of, of our customers day in and day out. This is an ever changing space. No jobs change more, I would argue, um, other than those where this reg leg liability sits within their ecosystem in our employer segments. So thank you for all you do. Thank you for joining us on the Benefits Breakdown today. And hats off to all our fiduciary listeners. We look forward to seeing you next time at the Benefits Breakdown.