Reference Based Pricing Provides Great Value, Without ERISA Fiduciary Risk Exposures
A recent BenefitsPro article argues that given the federal government’s endorsement of Reference Based Pricing (RBP) and its proven efficacy in reducing employer costs and expanding participant options, it is now virtually impossible for a plan fiduciary to lawfully discharge their duties in accordance with ERISA without at least considering the implementation of RBP.
According to the following excerpts, the article suggests an ERISA fiduciary duty to offer RBP:
- “Given the demonstrated benefits of RBP, CFOs, VPs of HR, and other plan fiduciaries under ERISA are now under a fiduciary obligation to evaluate the potential incorporation of RBP into their health insurance plans.”
- “ERISA imposes a fiduciary duty on plan administrators to act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan.”
- “Given the significant cost savings and expanded provider choice associated with RBP, it is increasingly difficult to argue that a plan fiduciary can discharge their duties under ERISA without at least evaluating the potential benefits of RBP for their health insurance plans.”
Is there really an ERISA fiduciary duty to offer RPB? NO!
A plan administrator who is a named fiduciary must execute their duties solely in the best interest of plan participants and comply with the terms of the plan, the tax code, the Public Health Services Act and ERISA. However, the fiduciary decision on whether to adopt RBP should never be made by the plan administrator; it is part of the settlor function performed by the plan sponsor or employer.
Settlor decisions establish and fund the plan, ensuring it complies with legal requirements. Most plan documents identify the employer as the plan sponsor. Too frequently, the same plan document will also identify the employer as the plan administrator. Those roles and duties should be kept separate so that when making decisions, a plan sponsor doesn’t end up wearing the wrong hat, or worse, end up wearing both a settlor and a fiduciary hat at the same time.
Best practice would keep these roles separate and distinct. Best practice would totally separate settlor and fiduciary duties (different committees, comprised of different people, carefully avoiding conflicts – avoiding reporting relationships between fiduciaries and those performing settlor duties).
The goal should be to ensure that the plan document and Summary Plan Description clearly outline who is performing duties that are part of the plan administrator/ERISA fiduciary function, and that those individuals are different from the plan sponsor performing settlor functions.
Health Reform, Federal Agencies and RBP
By implementing Health Reform, federal agencies cast a wary eye on RBP and its impact on participant-paid, out-of-pocket costs. For example, the Department of Labor’s (DOL) FAQ#31 (Q7) specifically addresses the DOL position on RBP, essentially requiring all out-of-pocket costs (including amounts in excess of the reference price) to be counted in satisfaction of the out-of-pocket expense maximum where the plan “…establishes a reference price without using a reasonable method to ensure adequate access to quality providers at the reference price.”
Just recently, some DOL representatives suggested it was time to reconsider the use of reference pricing in health plans. They asked:
- To what extent, and how are plans using reference pricing?
- How is it impacting participants and plan sponsors?
- Are there changes to existing guidance that should be considered?”
That is, the Department may be receptive to adding new regulatory guidance to limit the use of RBP – perhaps expanding on the Department’s recent No Surprises Act guidance (Health Reform FAQ #55, Q&A 4 & 5).
RBP Strategy, YES!
We agree that every plan sponsor acting in its settlor role should consider RBP as a means to maximize the cost/benefit of their health plan. We believe RBP “done right” should anticipate the challenge of balance billing and provide participant representation.
Reference-Based Pricing (RBP) is one of the fastest growing solutions in health benefits cost management to avoid unreasonable or excessive provider charges – potentially lowering the cost of coverage and employee point of purchase cost sharing. A “pure” RBP structure, coupled with tech-driven data support, may avoid unreasonable or excessive provider charges.
Value of a Medical Billing Partner
Plan sponsors and administrators are benefiting from partnerships that provide them with insights through data-driven solutions. Real-time price information of the true cost of health care services enables sponsors and members to make the most advantageous cost-benefit decisions regarding enrollment options.
aequum is a first-of-its kind tech-driven company in the complex field of medical billing. “Our tech-driven team partners with health plans, providing administrative, technical and legal support to their members,” says Christine Cooper, CEO of aequum. “Working together, we are advancing solutions to manage costs, reduce spending and gain potential savings.”
As your partner, aequum can guide a reference-based pricing strategy and help lower costs, achieve savings, enhance member experience, and support your plan’s success in 2023/24 and beyond. Please contact us if you have any questions or need support.