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The federal Employee Retirement Income Security Act (ERISA) will mark its 50th anniversary this year, after being signed into law by President Gerald Ford on September 2, 1974. As modern business practices evolve far beyond the 1970s landscape that initially established ERISA, lawmakers are now considering significant changes to align the law with today's challenges and realities. The U.S. House Committee on Education and Workforce recently reached out to health insurance experts, including those represented by the National Association of Benefits and Insurance Professionals (NABIP), seeking insights on potential changes.
 
NABIP represents more than 100,000 health insurance professionals and helps millions of employers and individuals navigate health insurance compliance and administration. Responding to the Committee's Request for Information (RFI) dated January 22, 2024, NABIP's working group of attorneys, compliance experts, and licensed professionals shared comprehensive feedback on ERISA’s current challenges and areas for improvement. NABIP’s full 30-page response can be read here.
 
This column highlights NABIP’s responses to the Committee’s inquiry, showcasing the association’s advocacy and commitment to bettering health benefits for employers and beneficiaries nationwide. This advocacy reflects NABIP’s overall mission to become essential in all aspects of health care.
 
ERISA Preemption
NABIP emphasized that ERISA’s preemption of state laws is more crucial than ever as remote workforces become the norm. Employers with employees in multiple states find conflicting state laws around health administration and coverage mandates costly and challenging. For example, state-level reporting requirements for individual health insurance mandates in California, Massachusetts, New Jersey, Rhode Island, and Washington D.C. complicate compliance for multi-state employers and their plans.
 
To strengthen ERISA preemption, NABIP recommends the Committee proactively address federal legal challenges, such as the upcoming federal PCMA v. Mulready case. NABIP urges Congress to modernize ERISA preemption to ensure consistency and predictability for plan sponsors nationwide.
 
Fiduciary Requirements
NABIP advocates modernizing ERISA's fiduciary requirements to better reflect the modern health benefits landscape. NABIP’s response to the Committee proposes that each health plan have a primary fiduciary, typically the employer, while introducing the concept of “associate fiduciaries” among service providers. This structure aims to make accountable those making day-to-day care, claims, and coverage decisions for group plans – such as Pharmacy Benefit Managers (PBMs), Third Party Administrators (TPAs), etc.
 
By creating an “associate fiduciary” status, applying fiduciary standards based on function (like HIPAA/HITECH rules), and revisiting federal case law, NABIP believes that Congress can clarify roles and enhance protections for plan participants and beneficiaries. Such updates to ERISA’s definitions and fiduciary obligations will ultimately ensure better national plan administration accountability.
 
Reporting Requirements
Complex reporting and disclosure requirements under ERISA present overwhelming financial and administrative burdens for employers. Plan sponsors often lack autonomy and depend heavily on service providers for data, leading to compliance challenges. NABIP urges Congress to ensure that data holders are accountable for federal reporting requirements, not just the plan and its administrator. NABIP further recommends a consolidation of the multiple reporting platforms into one system to simplify reporting transmittals. Additionally, NABIP advocates for creating one single annual health and welfare plan notice for all reporting, rather than the many separate notices required today.
 
NABIP also recommends establishing a Summary Plan Description (SPD) model document – backed by federal templates and adopting retirement plan reporting safe harbors for health and welfare plans.
 
Prohibited Transactions
Conflicts of interest between health insurers and their PBMs, TPAs, and other entities can undermine plan sponsors’ best interests. NABIP highlighted the need for immediate action to address prohibited transactions due to vertical integration and acquisition consolidation among health insurance administrators.
 
NABIP supports increasing transparency through Affordable Care Act (ACA) and Consolidated Appropriations Act (CAA) provisions, while also urging the Committee to address enforcement inconsistencies, and simplify guidance for prohibited transaction exemptions. NABIP also supports investigating potential ERISA barriers that prohibit adopting alternative payment models, to ensure fairness and accountability.
 
Data Sharing
To improve data sharing between employer-sponsored plans and service providers, NABIP advocates establishing service providers as "associate fiduciaries" to improve cooperation and facilitation. NABIP also notes that shifting the "gag clause" attestation burden to those responsible for contract negotiations (providers and plans) is crucial, as plan sponsors/employers often do not have insight into their plan’s provider contracts.
 
HIPAA Privacy and Cybersecurity
NABIP identifies gaps in HIPAA’s structure and advocates expanding the Department of Labor’s oversight role to strengthen privacy protections. It recommends explicitly saying that state privacy laws regarding PHI are preempted by ERISA, modernizing business associate agreements (BAAs) to guarantee compliance, and issuing annual cybersecurity guidance reflecting evolving threats.
 
Direct and Indirect Compensation
Insurance consultants are particularly confused about the CAA’s compensation disclosure requirements. NABIP suggests clearly defining consultants’ responsibilities within the law and expanding the requirements to sub-fiduciaries if “associate fiduciaries” are established. NABIP also advocates for adjusting the current $1,000+ disclosure threshold, aligning it with Per Employee Per Month (PEPM) pricing models and setting a more modern minimum commission floor for disclosure responsibility. NABIP additionally requests guidance to clarify the roles of consultants and sub-fiduciaries and simplify reporting requirements to ensure transparent and accurate reporting for all involved parties.
 
Medical Loss Ratios (MLRs)
Medical Loss Ratio (MLR) requirements have not effectively reduced premium costs for plans or participants as intended. NABIP argues that insurers can manipulate MLR calculations, particularly for prescription drugs, to exclude rebates and other savings, thereby shielding cost benefits from plan sponsors. NABIP urges the Committee to reassess how MLRs are calculated and to categorize allowable claims, quality improvement expenses, and administrative expenses more accurately. NABIP also suggests that broker compensation should be reclassified as a pass-through expense for carriers, rather than as an administrative expense.
 
COBRA and Portability
COBRA premiums are based on the actual gross cost of employer-sponsored health insurance; they are more than just the employee’s former contribution. NABIP highlights its concerns about loopholes within COBRA law that allow a third-party to pay a person’s COBRA premiums. While this was initially intended to include COBRA with severance pay, some entities have found it financially beneficial to pay for individuals’ COBRA coverage, keeping them on their group health plans. The National Kidney Fund is now the greatest payer of COBRA premiums since the reimbursement dialysis providers receive under group plans is much more than they receive under Medicare.
 
NABIP recommends one of three solutions: prohibit “third party” premium payments entirely; consider those “third party” premium payment amounts as taxable income; or limit third-party payments to those made through a Section 125 Cafeteria Plan, which would then limit the practice to previous or current employers only.
 
Regarding the portability of health benefits under ERISA, NABIP believes the ACA and individual market reforms have largely resolved this issue. Instead, NABIP suggests prioritizing other priority concerns, such as transparency, MLR calculations, and compensation disclosure guidance.
 
Specialty Drug Coverage
NABIP highlights the complexities employers face in providing affordable access to high-cost specialty drugs, noting that rapidly rising medication costs often lead to ethical dilemmas in coverage design. Specialty drugs can account for up to a quarter of a health plan’s spending and managing related medical care costs further compounds affordability. To address these challenges, NABIP suggests comprehensive strategies like utilization management, formulary management, employee education, and value-based agreements from manufacturers.
 
While stop-loss coverage is commonly used to offset significant costs, it often excludes high-cost specialty drugs. Larger employers that self-insure are especially vulnerable due to the lack of comprehensive reinsurance coverage. NABIP urges the federal government to consider providing cost offsets or a reinsurance back-stop to address this issue and support access to specialty medications. Additionally, the power imbalance between employers and drug manufacturers makes value-based arrangements challenging, emphasizing the need for government intervention.
 
Conclusion
As lawmakers consider modernizing ERISA near its 50th anniversary, NABIP remains dedicated to shaping reforms that increase the affordability and quality of employer-sponsored plans – and all related health insurance and health care items. Stay tuned to this column and to NABIP for future legislative and regulatory activity resulting from this dialogue.
 
Word & Brown has been a proud partner of NABIP since the company’s establishment nearly 40 years ago. Personally, I am very active in NABIP, staying on top of legislation and compliance through the national association and its corresponding California Agents and Health Insurance Professionals (CAHIP) state chapter. I am proud to serve as CAHIP’s Vice President of Legislation for 2023-2024.
 
To learn more about how NABIP supports insurance brokers and the industry, please visit NABIP.org, and consider becoming a member. Join in on the conversations shaping health care locally, statewide, and nationally!