Regulatory Resources
A new federal law, The Consolidated Appropriations Act, 2021 (CAA), requires brokers and consultants to disclose compensation that service providers receive in contracts executed on or after December 27, 2021.
New Service Provider Disclosures to ERISA Group Health Plans
The CAA adds disclosure requirements specific to ERISA group health plans. Once these new requirements take effect, no contract or arrangement for brokerage or consulting services is considered reasonable unless certain disclosure requirements are met.
The new requirements apply to any service provider, it’s affiliate or subcontractor that reasonably expects to receive at least $1,000 (adjusted for inflation in regulations) or more in direct or indirect compensation for:
- Brokerage services provided to an ERISA group health plan with respect to:
- The selection of health insurance products (including vision and dental)
- Recordkeeping services
- Medical management vendor
- Benefits administration
- Stop-loss insurance
- Pharmacy benefit management services
- Wellness services
- Transparency tools and vendors
- Group purchasing organization preferred vendor panels
- Disease management vendors and products
- Compliance services
- Employee assistance programs
- Third party administration services
- Consulting services related to:
- The development or implementation of plan design
- Insurance selection (including vision and dental)
- Record- keeping
- Medical management
- Benefits administration selection
- Stop-loss insurance
- Pharmacy benefit management services
- Wellness design and management services
- Transparency tools
- Group purchasing organization agreements and services
- Participation in and services from preferred vendor panels
- Disease management
- Compliance services
- Employee assistance programs
- Third party administration services
“Compensation” includes both cash and non-monetary compensation valued at more than $250 (adjusted for inflation by regulations) paid, in the aggregate, during the term of the contract or arrangement.
Covered Service Providers’ Disclosure to Plan Fiduciary
The law requires a covered service provider to disclose, in writing, the following information to the group health plan fiduciary:
- A description of the services to be provided to the covered plan pursuant to the contract or arrangement
- If applicable, a statement that the service provider (or an affiliate or subcontractor) will provide, or reasonably expects to provide, services to the covered plan as a fiduciary
- A description of all direct compensation the service provider (or an affiliate or subcontractor) reasonably expects to receive in connection with the provision of services
- A description of all indirect compensation the service provider (or an affiliate or subcontractor) reasonably expects to receive in connection with the provision of services (including incentives paid to a brokerage firm not solely related to the contract with the covered plan)
- A description of the arrangement between the payer of the indirect compensation and the recipient service provider
- A description of the services for which the indirect compensation is received
- The identity of the payer of the indirect compensation
Indirect compensation means compensation received from any source other than the covered plan, the plan sponsor, the covered service provider, or an affiliate. Compensation received from a subcontractor is indirect compensation, unless it is received in connection with services performed under a contract or arrangement with a subcontractor. - To the extent compensation is paid among a service provider, the service provider’s affiliate, or the service provider’s subcontractor on a transaction basis (such as commissions or finder’s fees), a description of any such arrangement and identification of the payers and recipients of such compensation (including the status of a payer or recipient as an affiliate or a subcontractor)
- A description of any compensation that the service provider (or an affiliate or subcontractor) reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded upon such termination
- A description of the manner in which any direct or indirect compensation will be received by the service provider (or an affiliate or subcontractor)
This information must be disclosed to the responsible plan fiduciary before the contract or arrangement is entered into, extended, or renewed. In addition, the service provider must notify the plan fiduciary of any change to the above required disclosures as soon as practicable, but not later than 60 days from the date the service provider is informed of the change.
The service provider must also provide other compensation information requested by the plan fiduciary in order for the plan to comply with its annual Form 5500 reporting and disclosure requirements.
No contract or arrangement will fail to be reasonable under the new requirements solely because the covered service provider, acting in good faith and with reasonable diligence, makes an error or omission in disclosing the information required (or a change to such information disclosed, provided that the covered service provider discloses the correct information to the responsible plan fiduciary as soon as practicable, but not later than 30 days from the date on which the covered service provider knows of such error or omission.
A health plan fiduciary that meets certain requirements would still satisfy the requirements if the plan fiduciary relied in good faith on a service provider’s disclosures that later turned out to be incomplete or inaccurate. In such a case, the plan fiduciary must take reasonable steps to obtain the missing or incorrect information upon discovery, must inform the DOL, and must consider whether to terminate or continue the arrangement if the service provider fails to comply with a request for information within 90 days.
Luminare Health anticipates the U.S. Department of Labor will issue regulations containing further guidance. We will provide additional information as it is available.