How the J&J Lawsuit Impacts Health Plan Fiduciary Obligations

Much has been written recently about the increased scrutiny of employer's fiduciary responsibility related to the health and welfare plans offered to their employees. High profile complaints against employers, such as Johnson & Johnson and Wells Fargo, also raise concerns about an increased risk of participant lawsuits. This panel of experts will help explain what employer fiduciary responsibility really means, discuss the current litigation, and debate how much new risk employers actually face. What you'll learn: Understanding Fiduciary Responsibility: Gain a clear understanding of what fiduciary responsibility entails for employers concerning their health and welfare plans. Current Litigation Trends: Learn about recent high-profile lawsuits, such as those involving Johnson & Johnson and Wells Fargo, and what they signify for employers. Risk Assessment: Explore the potential risks and liabilities employers may face in light of increased scrutiny and litigation. Mitigation Strategies: Discover strategies to minimize the risk of participant lawsuits and protect your organization from legal challenges.

Transcription:

 Bob Radecki (00:09):

If there was walkup music, it would have to be Springsteen or I wouldn't come up. I'm kind of a groupie. Welcome. Good afternoon everyone. And yeah, we're going to talk about Fiduciary Liability today, which is the most exciting topic in the world to talk about right after lunch, but we're actually going to make sure it is. Again, my name is Bob Radecki. I'm a Principal Senior Regulatory and Public Policy Analyst, which mean my marketing department went wild on me in creating a title. That's all that means. But at Benefit Comply, what we do is we support employers and insurance professionals in compliance around employee benefits, and we literally take hundreds of questions every month on these topics. So I think we've got a good pulse on what people are asking about and thinking about. And this topic has been generating a lot of questions lately over the last months and even more than that, and I'm really kind of excited when I found out about the panel we had put together. I'm really excited. I'm going to give a little more of a bio here on everybody because this is a panel that's going to help you understand what it means to be a fiduciary and also what's really employers are worried about relative to these lawsuits. And so I'm going to start again with Jessica. Jessica and I go back quite a ways because we just spent time on a boat in Minnesota, didn't we? A back beautiful day. I think

Jessica Brooks-Woods (01:22):

We're going to have pictures up or something.

 Bob Radecki (01:23):

Yeah, it was a beautiful day. Jessica's Chief Executive Officer you mentioned at NABIP based in DC, NABIP, if you don't know them, is kind of the leading organization that for a health insurance and employee benefits professionals working to ensure that all Americans have access to high quality affordable healthcare. But Jessica, I love your resume here because I don't know how you find time in the day to do all this stuff. Two decades of experience. You spent time at the Pittsburgh Business Group on Health Co-founded the Earned Network, which works on economic empowerment for African-American workforce and the community. But here's the part that just blows me away. You're on the board of Governors, university of Pittsburgh Institute, entrepreneurial Excellence, Pittsburgh Regional Health Initiative, patient Health Action Network, and an appointee on the Pennsylvania Health Insurance Exchange. How do you do all that in one day?

(02:12):

That's incredible

Jessica Brooks-Woods (02:12):

Little sleep.

 Bob Radecki (02:13):

Yeah, Jessica's on the front lines in DC helping all of us work with the policymakers on trying to make good laws and regulations related to health policy. Next here is Peter Freska. Peter is the Employee Benefits Growth and Practice Leader for Acrisure, a leading provider of employee benefit solutions for employees and plan sponsors for two decades. Also, Peter's worked with employers to help strategically discuss how to revolutionize healthcare. Peter and the team bring value to employers with unique perspectives. You've also been on the board of the National Association of Insurance Financial Advisors and like me as a proud member of NABIP and very appropriately, some of you probably know Peter because you were recently honored here by employee Benefits News Excellence and Benefits program as a change maker in the benefits and HR community. So part of this group, last but not least, Andrew.

(03:07):

Andrew Holly is the Chair of the ERISA Litigation Practice Group at Dorsey & Whitney. I've known Dorsey for many years. We actually both come from Minnesota as where one of Dorsey's big locations is, but they have locations all over the world. Again, it's a 20 year theme, 20 years experience in representing plan sponsors and insurers and providers in erisa. Litigation Matters has been named one of the top ERISA litigators in the nation and has represented group health plans and TPAs against a variety of erisa, fiduciary prohibited transaction, RICO claims, et cetera, et cetera. Best thing I'd say about Andrew, he's the guy if you're facing a high stakes litigation that you want on your team, not on the other guy's team.

(03:53):

And so Andrew's going to give us that perspective of a practicing litigator in what we're talking about. So what I wanted to do just really, really quickly is just give you kind of a two minute set the stage and then we're going to start grilling our experts with questions that we've taken from employers and insurance professionals to sort this out. So recent class action lawsuits against Johnson and Johnson and Wells Fargo accusing them of violating their fiduciary duty in operating their health plans has kind of created a lot of concern. US employers and service providers in the room. Is there a lot here? Is there something that we should be worried about? Is there going to be more of these things? In both cases, the employers were accused of selecting service providers and vendors and overpaying for their prescription drugs, which caused their employees to overpay for the prescription drugs and caused the cost of the plan to be higher than needed to be.

(04:50):

So employees had to pay more to participate, thus violating their fiduciary duty because they weren't watching over the store. Both these cases revolve around fiduciary responsibility and we don't have time today to have a fiduciary responsibility seminar. You'd be here till six o'clock tonight. So suffice to say for now, at its core, if you don't work in this area, a fiduciary of a plan has to act in the best interest of their participants. That's the core concept, I'm sure, Andrew, you've kind of shudder it. It's such a simplistic description of fiduciary responsibility. No comment. Yeah, trust me, there's a lot more to it, A lot more to it than that. But the problem right now is too, we're facing a trend in the healthcare area that is also concerning employers and that is this drive towards health cost transparency that all of the recent legislation and regulatory action around health cost transparency is a double-edged sword.

(05:50):

I think most employers would agree that we want more transparency in healthcare. We like that, but some of the rules and regulations and the way we're getting there has caused a lot of angst and a lot of problems for employers to follow and comply with, especially since we as employers have to rely on our service providers and our vendors to do a lot of the work. And so we're put in this position where really we're having to rely on those service providers and vendors to do the things to properly comply with the laws that we're having to follow. And so the choice of and the selection of who you work with becomes I think a core fiduciary responsibility. One of the things that is most important for you to do, I'll close with just this one story that I like to share about when it comes to health cost transparency, and then we're going to get right into the questions.

(06:42):

If we bought wine, we're in a wine region here. Temecula is not far away. If we bought wine the way we bought healthcare, here's how it would work. You would go to your wine store and you would say to your wine proprietor, I just got a really nice steak. I want a bottle of wine that's going to go with that nice steak tonight. And your wine proprietor would give you that bottle of wine. You'd go home and you'd drink it. You'd come back to the wine store the next day and say, how much do I owe you? And the wine proprietor would say, $3,000. You'd say $3,000. It was a bottle of wine. He said, I gave you exactly what you needed that knee surgery, I mean bottle of wine. And that was a really good knee surgery. I mean bottle of wine, it was a special bottle, but the reason it was it's $3,000 is the label on the front was done by a local artist and it was a one shot label.

(07:31):

And so that label was 2,900 bucks. That's how we buy healthcare. You find out after the fact what you got and what you're going to pay for it. So again, I think we agree that moving that direction is the right thing, but it informs us today. And because part of this lawsuit here that we're going to talk about revolves around some of the transparency issues. It informs kind of what we're struggling with. Alright, so with that, I'd like to start with, I mentioned to all three of you. Give me just your first thoughts, two minutes or less. This is the speed round of just the world we live in around the evolving or the evolving employer responsibility, financial fiduciary responsibility, and how transparency plays in it. Jessica, let's start with you.

Jessica Brooks-Woods (08:15):

Alright, two minutes. Well, these aren't new issues. First of all, we have been at the table watching things happen from a regulatory perspective and from a marketplace perspective for many, many years. And many of it has started at the state levels. When you think about mass consolidation over time, many states have had certificate of need processes that have gone away where employers and the community had a role to play in helping to direct really the competitiveness and the opportunity for affordability within their marketplaces. So from a policy perspective, from a marketplace dynamic perspective, consolidation is one of many of those things, new innovations in healthcare. We've literally, as employers and their advisors have been on the front lines, we may have not been as active as we should be. And I think what this time is calling for is as a response to stewardship in action that is requiring us to have stewardship in action as a result.

 Bob Radecki (09:19):

Okay. Thoughts, Peter, your first initial thoughts on what we're talking about today.

Peter Freska (09:23):

So as Jessica said, transparency isn't a new issue. It's been ongoing for 20, 30, 50. Go back to Nixon's comments in seventies about healthcare costs. Even JFK commented on healthcare costs, the rising costs of healthcare, and we need to do something about it. So we're dating well back into things. And as we sit with employers on a regular basis, they always want to know to your bottle of wine, I was wondering where you're going with a bottle of wine story. How much does this bottle of wine cost? And we deliver a 15% renewal, a 20% renewal, and there's no data to back it up because that's what put in the name insurance company said that your employer is now required to get, we negotiate, we fight, but there's still no data, there's no transparency. So where is this coming from? So we're constantly battling how to create transparency. But then to your point earlier, Bob, there's conflicts in the laws, which I'm sure Andrew will talk through about HIPAA compliance and being HIPAA hands off as an employer. So do we get that data and to what level do we get that data? So all these things play in to where we are today and talking through fiduciary responsibility as that plan administrator.

 Bob Radecki (10:44):

So Andrew, before you do your first two minutes, I have to tell the crowd that I came into the hotel last night and saw Andrew sitting next to the pool in his suit. I said, Andrew, you'd be a lot more comfortable if you'd put on a T-shirt and jeans or something than sitting next to the pool in your suit. And he said, well, that would be great if I had my suitcase. So he managed to get here in Minnesota with no suitcase or anything other than the suit and the tennis shoes he is wearing. So this isn't that we dress really casual in Minnesota for our legal proceedings there. It's that the suitcase still hasn't shown up. So I'm sorry about that, Andrew, but your first initial thoughts on fiduciary liability.

Andrew Holly (11:19):

So I thought it might be interesting just to kind of give you a little sense of sort of the ecosystem out there and the practical economics that drive these lawsuits. Most of you're aware that there have been probably over a thousand lawsuits challenging 401k fees and expenses and investments. There have been a series of plaintiff's lawyers have, there have been billions of dollars in settlements, which means that the plaintiff's lawyers that have brought these cases have made billions of dollars and other plaintiff's class action lawyers see that and they get interested in it and they swarm. I'll avoid any sort of pejorative metaphors here, but they swarm to that, right? And they want to get a piece of the action. And so billions of dollars have been made and now these new lawsuits, you're seeing a lot of a drive to investigations and drives to try to get towards these and try to file these.

(12:10):

And these are all lawyer driven. If you have not seen them, you can look at LinkedIn, you can look at Facebook, you can see the Schlicter firm will have ads on there saying, do you work for X, Y, Z? Your plan is ripping you off. Call us. They've already done the work. They already know that. They think they have a claim and they're just looking for, to be blunt, a potted plant to rep to be the plaintiff in the case. And so we already have two of these cases and really kind of a couple more that have been hanging out there. And if these cases are successful, and we'll talk about that in a little bit. If these cases are successful, we're going to see a lot more simply because we're going to see a lot of plaintiff's lawyers are very interested in making money and that's what that ecosystem looks like.

 Bob Radecki (12:55):

Interesting. Well, let's stick with you. I'm going to stick with you on the first question then. I didn't really break it down. Not everybody follows these cases as closely as some of us compliance geeks do. Can you break down those two cases specifically? What is the complaint? What are they accused of being doing?

Andrew Holly (13:09):

So remember that ERISA fiduciary duties are all about process. They're not about having the cheapest fees. They're not about in investment world having the most best performing investments or in the healthcare world, the cheapest drugs or anything like that. It's about good process making wise, intelligent decisions based on good information gathering processes. The allegations in both of these cases are that the fiduciaries of these two plans were essentially asleep at the wheel.

(13:35):

And their dealings with Express Scripts, express Scripts is their PBM Express scripts, which is involved in both of those cases. And I'm sure the people at Express Scripts weren't thrilled to see that. The prime allegation is that both plans entered into spread pricing arrangements with Express Scripts, where Express Scripts would sell generic drugs, generic specialty drugs for a highly inflated rate that the plan simply just paid when if they had just gone, for example, if they paid $10,000 for generic drug where they had just gone to your Walgreens and just paid for out of pocket or with a coupon, it would've been 40 bucks. And now just to be clear, simply because that's the allegation doesn't mean it's true. I assure you there's lots of things in complaints that are wrong. But then the allegation is also that they had other ancillary services that were bundled together and that they had conflicted consultants and all of that says that they were asleep at the switch and engaged in bad process.

(14:31):

There's two really big issues that there's two issues in these cases. The first is just that process issue. Did you have good process where you're doing the things you needed to do? Did you have good consultants? But the second, and this is wonkish, is what we call standing and that basically says if you want to have a lawsuit, you need to have a plaintiff who's actually injured by the practice. And if you read these complaints, even if you assume that they're true, the victim, if anybody is a victim, seems to be the plan Who overpaid for this stuff? So how are the plaintiffs actually injured? Well, in both cases we have what's called a motion to dismiss, which is an early procedural motion to try to see if the complaint even kind of says anything that can go forward and we'll see how those, we will talk about what happens in those in a little bit later, but that's where the process is right now.

 Bob Radecki (15:16):

Interesting. Okay, thank you. Hey, Jessica. So we talked about transparency, and I made the point that we have to, as employers rely on our vendors and our service providers for a lot of these transparency rules and other things, not just the transparency rules, but I'm interested NABIP position, you're in Washington. I said employers generally agree that transparency is a better thing, but what is NABIP position on where we're going with all these new rules and requirements around transparency? So

Jessica Brooks-Woods (15:42):

Transparency is from a legislative perspective, has been a top priority issue for NABIP in the last, well, I've been here a year, so at minimum of the year, but much longer than that. And there are two bills. One in the house has passed the lower cause, more transparency bill that we advocated greatly for to be passed. So please look that bill up, it has passed the house, it hasn't gone any farther. Then the Bronze Sanders bill was introduced, which is a lot more holds plans, health TPAs and others more accountable. So it has penalties built into it, and we have ultimately, we support that bill as well. It is an advanced version, I guess if you can say the next level version of that. And that's in the Senate. It has not even gotten, it was introduced in the Senate, it's not passed yet. So as far as transparency, yes, we can't be consumer centered and focused, which honestly is a reputation issue in our industry that we are self-interested or you said conflicted was a word that came out in the suit. The consultants were conflicted. We can't actually be consumer aligned and not align with transparency. We did have some discussion around the Bronze Sanders bill, the price, I think it's price transparency 2.0 is the name of, not the numbers. I can't remember all these numbers.

 Bob Radecki (17:08):

That's all right.

Jessica Brooks-Woods (17:10):

And we did have discussions around the punitive nature of that and the unintended consequences potentially. So not necessarily of transparency, but how we get transparency. And we ultimately said it is worth the effort that it may take to get to that level of insight so that plan sponsors can actually make the decisions that they need In all of that. There's other bills that we advocate for, we advocate for a lot of 'em start on the Medicare side, which I highly encourage employers to pay attention to. So there's a site neutral bill that's a part of a whole package of bills, but the site neutral bill that actually addresses the facility charges at hospitals. So many of us probably have heard of facility charges with the mass consolidation of providers and hospitals over the years, you may be at the same set of care, same doctor, same drug, but you're now owned by a women's hospital that can charge more. So you're now being charged from Women's Center of America and your doctor never changed and now your bills hike maybe 400%, 1000%. So these are bills that ultimately impact transparency and the ability for us to actually be stewards of access. So these are a few of the things that we've advocated for to ensure that employers can afford to provide access and that we can maintain a private health insurance ecosystem here in this country and that consumers aren't caught in the crossfire.

 Bob Radecki (18:38):

Okay, thank you. So Peter, we keep talking about transparency and that's not the only thing that causes fiduciary issues for employers. We didn't say this before, but you were mentioning beforehand, so many more employers are going and when they go self-insured taking a greater responsibility for some of these things than when they're just buying a fully insured package. Can you think of other things that are causing employers angst when it comes to fiduciary? And more importantly, are the employers that are moving to self-insured, do you think they're mostly prepared for what they're getting into and ready for their additional responsibilities?

Peter Freska (19:13):

Absolutely.

 Bob Radecki (19:16):

Really that wasn't the answer I expected.

Peter Freska (19:19):

Funny on Jessica's comments. Our own pediatrician was sold to a women's hospital and luckily I guess we're on a PPO. So we see the numbers, and my wife's not in this business, but she's married to somebody who is, so when she gets the EOB and says, oh, the plan's paying $300 for a regular visit instead of $95, she asked me, she says, what's going on? It's exactly your point. It went from a $95 visit to a $295 visit because they changed ownership to a hospital versus being a private IPA or pediatric office. So these things happen all the time. To your point, who's ready? You think us as consumers, are we ready for these things and we're not. I'm in the business and I miss it on my own kids and family, let alone employers looking at thousands of claims and all of a sudden we're saying, you know what?

(20:13):

Get rid of being in that fully insured plan and move to this self-funded plan, move into this captive, move into some alternative risk model. And by the way, you need to file your PCORI fees this year and your seven 20 and you're looking at me going, what the heck is that? And how do we do that? You need to be responsible for your IB and RS. You need to be responsible for reserving dollars, but don't worry, it's going to save you a million dollars a year depending on your size and so forth. It sounds all wonderful unless, until you start outlining these things. But then you have to make sure that your consultants aren't conflicted. I love that term. And they're providing the responsibility to you or sharing with the responsibility to you saying, Hey, here's what we went to. These are the TPAs we looked at. Here are the options on the table. Let's interview them. Let's make sure we're bringing the right things, the right processes and procedures. To Bob's point and Andrew's point earlier, it's all about making sure you have the right processes and procedures to address these questions. Should they arise and they will come up, an employee will complain, DOL complaint, whatever it might be.

 Bob Radecki (21:23):

So let's stick with, we're going to stick with your last thought there because I want to go to kind of section on calling, what can employers do about this, right? Because we keep talking about they have this responsibility, especially when they go self-funded, but they have this responsibility and we talk about wanting transparency, wanting the data, but we're not getting the data, we're not seeing the data. So I'm going to start with you this time, Jessica. Getting the information we need to probably do our job is still a huge challenge. So what can employers do when they're working with vendors and what are you helping employers think about to get their hands on the data we need to actually make the good decisions?

Jessica Brooks-Woods (21:59):

So my perspective, I'm bringing in some of my background into this conversation,

(22:04):

Leading an employer healthcare coalition for 10 years and data being a big part of my role and hopefully my impact in that organization. And okay, there's data. I mean, the thing is, it's not like there's no data and one is how are you actually leveraging the data that you do have access to and where is it and where does it sit? And so when you ask what are strategies employers can do, is this aggregating it from the folks that may have a conflict of interest when you need to make decisions at the point in time that you may, which may not be at this moment. So being as proactive as possible I think is a big strategy and bringing in an independent data vendor or partner to help you extract data from the variety of TPAs, PBMs point solutions that you have. It's not just from a fiduciary perspective, from a population health management perspective, how do you ensure quality and what you're spending per employee for your organization?

(23:10):

If you don't have insight into how they're experiencing the healthcare delivering and financing system, where are they accessing the system? And then knowing the trends, shoppable procedures for example. How can you design so that you can help people navigate the system? That's very complex. That's a basic thing that I think we have an opportunity to do. And if you can't do it as a smaller employer, there are coalitions like the Pittsburgh Business Group One Health in almost every state in this country and many, there's multiple in some states that have initiatives like this to help you be able to have insight. Oftentimes employers use, they don't have their own insight into data as the reasons why, but there's trends, marketplace analysis, market scans that companies like Truven and Milliman and others have put out there, leapfrog from a safety perspective, quantros from a quality perspective, have put out there that's accessible or that we can access to actually help us make decisions. So when I hear Andrew say process to me that's a process is we've actually pursued and have partnered with folks who are independent, who are providing objective data to help us make decisions. It's not perfect. It's not all of our claims data. It's not all of our cost data because we have to sign redacted contracts that the TPAs make us sign to be able to even have access to our data or we have to pay $5,000 per fee to get our own data,

(24:35):

Which is what some of these bills are addressing. The fact, how can you hold my own data hostage and they charge me for it to get access to it. So if possible, having an independent third party data partner, if not getting together with a collective of purchasers to be able to have insight and access to a data resource. Some states actually have all payers claim databases. How are employers actually leveraging those resources if they're privileged, excuse me, to have access to that within their locales. But also I think I've seen employers and I love employers, so great for all you employers in the room, but it's been very difficult. I'm not surprised at all. We're at this point of these lawsuits. It was inevitable. It was inevitable for a variety of different reasons. Capacity is one of them. The number of solutions and number of problems that have risen over the years are where especially drugs have come from. Again, site of care issues, et cetera, the A CA and just trying to get through the Cadillac tax potential. Those are things that employers have had to face. But as a result of that, there's been a level of apathy and exhaustion,

 Bob Radecki (25:47):

Exhaustion

Jessica Brooks-Woods (25:48):

That has prohibited us from taking action proactively before getting to this point and have been sometimes hesitant to communicate the truth to employees, which if we actually allowed some level of insight into this complexity in some kind of way, employees may be partnered with us versus against us.

 Bob Radecki (26:10):

Peter, I'm going to throw an audible. I know, I know where you're going with this. I was going to come back to you now.

Peter Freska (26:13):

Where am I going?

 Bob Radecki (26:14):

I bet I'm going to guess. I was going to come back to you and ask you about, you had mentioned about the process, the process of selecting vendors and stuff, but when you went down the path of getting the data and working with the data, I know you got something to say about that.

Peter Freska (26:25):

It's a tough place to be in, especially in the California market. We heavy capitated HMO market, there's no data even in large cases, large into the hundreds, even thousand employee case, if they're all on HMO, you're getting very little data. You're getting pharmacy data and maybe some facility hospital data, but anything under that is usually under the capitation depending how your contracts are set up. So you get very little to no data, especially if you're one of the 99% of employers that have less than 500 employees. It's 99% of employers in the US have less than 500 employees. So they're not going to get a lot of data. There are a few companies out there like the Milliman's Tri where they're able to start processing the hundreds and thousands of terabytes of data that all the carriers are putting out and the hospital transparency data that I'll air all the hospitals are compliant with. Andrew, I got to laugh out of the attorney.

(27:23):

And it's just how does a small employer, even with 500 or a thousand employees, how do they afford to access these things? So they need to goes back to the process and the procedures, making sure they're partnering, making sure they're working with those aggregators, be it the Pacific Business Group or whomever it might be, chamber of Commerce. There's a lot of opportunities out there to pull data together so that they can see where things go, where should be going. We looked at data from Chicago and from different places, sites of care for a knee and hip replacement and the highest cost of care, I'll leave some of the names out of it was a facility that was owned by the insurance company so that their contracted rate for their own facility was the highest cost of characters. That's what your employer group plan if you have, this is paying for. Interesting. So these things come out once we can really sift through the data, but it is terabytes and terabytes of data that are coming out on a regular basis right now and getting it together and understanding once you have all that data, now it's applying it to your employer. We do about it. If you have 50 employees or 5,000 employees, how does this apply to my folks in a day-to-day basis becomes part of the question.

 Bob Radecki (28:48):

So Andrew, we've touched on process a couple of times. I'm going to phrase this a little differently than I was going to originally give us some ideas on what we can do about the process and what we can do as employers. So we don't need you, I'm not too worried about you worrying about being out of business, but what can we do? What as employers, what can we do and how we handle our fiduciary responsibility to limit our risk and do better?

Andrew Holly (29:14):

The first thing I'll say just before I answer your question is this transparency trend is going to be an absolute godsend for the plaintiff's class action lawyers out there. Oh geez. And that was not, and I can't imagine that was an intended consequences and it's an unintended consequences, but it will be right? And obviously navigating the terabytes of data is going to be a problem for everybody, but it will absolutely, absolutely incentivize these kinds of actions. Now going to the point that we could talk for, I have talked for an hour and a half about the things you could do to try to protect yourselves. And I won't do that here because you'll hate me. But I would just say the couple of comments, ERISA cases are about process. You don't have to be the best. You have to make good decisions based on information.

(29:54):

And so the number one thing is to actually have good process. And both Jessica and Peter have done a good job of talking about all the options that are out there for people to try to understand this stuff. You can't really do it on your own and all that's out there. But the next thing I would say that's really, really important is not just having good process but documenting it, right? Because if a lawsuit happens, I come on here and I would love to be able to explain to the court all the things that people have been doing to try to do a good job over the last six to eight years or whatever it is. And if there's not good notes and committee meetings and minutes and things like this of what happened, it's very hard for me to tell that story right now on the 401k side.

(30:32):

Very well, it's well done that you have, it's very normal to have committees with meetings and presentations by your investment advisor and all this sort of thing. And they're put in these nice little books and things like this and it's a very easy story to tell. But on the health side, I think people up until now have been treating it more sort of like an HR function or a function of just sort of company cost and not so much an ERISA fiduciary standard simply because everybody thought as a practical matter, this is company money, which is fine, but now we're going to start to see that change. And I think if these lawsuits really do get legs and having good process and having good documented process is going to be very, very, very important so that you can tell that story if you need to.

(31:17):

The last point I'll make, and again, I could go on, but the last point I'll make about this is if you ever get a request for documents for health plan documents that looks like it might be written by a lawyer, you should talk to a lawyer because that's how these things usually start when they make what's called a 1 0 4 B request under ERISA for documentation. And if there's somebody's just looking for their SPD, I wouldn't worry about it, but if somebody's asking for committee notes and a laundry list of stuff, that's when you should be concerned. And I will tell you that I have seen multiple cases in the 401k world that would never have been filed had that process been managed appropriately.

 Bob Radecki (31:53):

Interesting. So I'm going to come back to Peter and we're going to go different order again here, but let's stick with process because we started by saying part of the future responsibility is selecting and monitoring your vendors and service providers properly. But Peter, I hired you. That's your job. You are supposed to tell me what vendors I'm supposed to hire. How are you going to help your client show that they've made the right choices,

Peter Freska (32:21):

Documentation to Andrew's point, documentation, documentation. Interestingly enough, I think also to Andrew's point on the DOL website, there's a 12 step process of monitoring and documenting that you can follow. Google it, it pops up, download the PDF, here's your 12 steps to go through everything from making sure that you have the right process of vetting them to monitoring. And again, it's not about being the least expensive option. It's showing that we went through the process and this is what we decided to do as planned fiduciaries. Document the reasoning behind that. It's much easier in the public entity world, say easier in the sense that there's almost a perception of you have to do these things when you're a private employer. You're like, this is to your point earlier, this is my money. This is our money. We're just spending our $10,000, 15,000, $20,000 per employee, per year, whatever it might be.

(33:20):

And that's what we're doing. So why do I have to tell anybody about that? It's not that you're telling anybody about it, it's that you're documenting that you reviewed it and that if you do get that letter, Andrew mentioned that you have the backup to say, Hey, this is the process we went through. We looked at these three vendors for our TPA services. We looked at these three PBMs. There aren't that many PBMs out there. There's about 70 and three of 'em own 80 plus percent of the market. So you can look at those and say, okay, here are the PBMs that we went through and if you document this process and your consultant, your advisor, your broker, whatever, whoever is you're working with on this should be able to show you that this has been done on a regular basis. And that's something you do. We do it all the time in the 401k world fiduciary education, things like that. We need to bring it to the employee benefits world. And sadly, it's one more thing

 Bob Radecki (34:19):

We all have to worry about.

(34:21):

Well, Peter, you mentioned something. I wanted to make sure everybody heard 'em because I was going to say the same thing. The Department of Labor does have a fabulous document, and I'm not pitching the Department of Labor here, but on employer fiduciary responsibility for health and welfare plans. It's actually written in English and I can understand it, and I'm not an expert in that field. So if you Google DOL employer fiduciary Responsibility, health and Welfare plan, it is a nice introductory age and a half easy to these issues that we're talking about from the horse's mouth. I'm sorry, everybody from the Department of Labor here that I called a horse. What better

Peter Freska (34:54):

Rebuttal that you said, I went through these 12 steps and I followed these things. Here's my 12, followed your guidelines.

 Bob Radecki (35:01):

Well, we're going to save, Jesse, you're going to get the last word in a minute here because I'm going to come back to Andrew one more time and I'm going to really put you on the spot here. Okay? I'm going to ask you to take your crystal ball out and predict whether you think we're going to see an increase in these kind of lawsuits or not. I think you touched on it. I know what's going on now, but talk through in a little more detail. I think that's the fear here, right? Employers are afraid this is the tip of the iceberg and we're going to see a hundred of these lawsuits next year and 200 after that. Do you think this is going to what direction this is going to go?

Andrew Holly (35:35):

So it all depends on these motions to dismiss. Again, the motion to dismiss is a early procedural motion that just says, I assume everything you say in this complaint is true, but still you haven't gotten there. And there's going to be motions to dismiss in both cases, both on the standing grounds, the constitutional standing grounds that I mentioned, and also just that they haven't pled, plausibly pled is the phrase we lawyers you good fi a breach of the fiduciary duty, right? I will tell you that I know that there are a lot of firms out there that are waiting and the wings, and if these motions to dismiss are granted this thing, I wouldn't say it'll die on the vine, but it'll definitely be a problem if the lawyers are successful that earlier it'll be a problem for them. If they are denied, what happens next then?

(36:19):

Well, what happens next is you get into the discovery phase of the case and then your obligation is to share information to the other side. And there's this incredibly arduous and tedious and really quite miserable process where you just have to share information and have depositions and things like this. Well, that costs millions of dollars. And at that point there's also risk. You don't know what's going to happen. So the pressure to settle becomes extremely high at that point. And then of course, the settlement is exactly what plaintiff's lawyers want. They have a $10 million settlement, $10 million goes into the plan and they ask the court and say, please give us 2 million of that, please. And usually it's granted if there's some sort of successful settlement. So these motions dismiss are going to decide a lot because once if they're denied, then there's going to be a lot of plaintiffs that are going to see a dollar sign there and they're going to move towards it.

 Bob Radecki (37:09):

Okay, that's interesting. Going to stick with this. I was thinking about it wrong then. I was thinking we wouldn't really know if there was be an increase in interest until after we found out what the settlements were. Like you're saying, if we just get past this motion to dismiss and these go forwards going to be a lot of plaintiff,

Andrew Holly (37:24):

There's going to be a lot of plaintiffs that are going to see money because they know if they can get past a motion to dismiss, the pressure to settle will be higher. Now of course, the first, if there's a hundred million dollars settlement at some point that's going to exaggerate, push it further. But once you see my motions to dismiss that are denied in some way, shape or form, the pressure to settle there would be, I would predict that there would be a lot of more of these cases to follow. And I bet there's a lot of plaintiff's firm out there that are just sort of waiting in the wings to see if these things have legs.

 Bob Radecki (37:53):

Again, I know you can't predict timing, but the Johnson John Case has been around Now. When was it filed? It's been a while. It's been a little while. And we're not even to knowing whether they're going to dismiss or not.

Andrew Holly (38:03):

No, it will take, there was an amended complaint. There was a complaint, and then there was an amended complaint very well could be a second amended complaint. These things go on and on and on, and I don't know the exact status of it, but I know a motion dismissed was filed. I would expect that depending on the particular court's procedures, we could hear something at the earliest By the end of the year, probably 2025, a Wells Fargo case is a little bit further behind. So that's what we'll see.

 Bob Radecki (38:30):

Well, that's interesting because I mean, if everybody caught, we're at a really interesting time for this, then we're kind of stand on the edge of the cliff a little bit from our perspective. If this moves forward and we're talking about big settlements, then we're going to get more worried. Right now we're kind of holding onto those motions for discuss.

Andrew Holly (38:45):

I would guess that we'll over the next preceding months, we'll see a few more.

 Bob Radecki (38:48):

Okay. Just getting in the line.

Andrew Holly (38:50):

Just people putting their foot in the water, that kind of thing, just to guess, who knows?

 Bob Radecki (38:54):

Yep. Thank you. Jessica, I'm get a last word here. You're in dc You're working on behalf of US employers and insurance professionals trying to get things going. What can employers, us regular employers do to help in our efforts to create legislation and regulatory change and things that help us in these cases? What can we do?

Jessica Brooks-Woods (39:17):

Traditionally, employers for a variety of reasons, haven't been as involved from a policy perspective. We're starting to see that shift, for example, came from Pittsburgh. So finance district, big meds and meds with finance and technology. Finance banks for example, are highly regulated. So traditionally they've been a part of chambers of commerce and on the boards of a lot of proactive employer groups and legislate on things like the environment, but have kept healthcare on the sideline and have taken a stance of, we're regulated enough, we're not going to advocate for another industry to be regulated, although they're impacting our EBITDA, that's changing. So now they're expecting us to be more active in policy reform around surprise billing. They are understanding the impact on the folks that they do care about, that they want to be a great place to work, A place that's seen as a steward of their populations and their community.

(40:18):

They are expecting, they really are beginning to focus on hospital pricing. They see it as egregious and are going to be more active, I believe, in that space. But we all know CEOs are farther removed from these issues than benefits and HR leaders that are in this room. So being proactive in educating upline to your leadership within your organizations I think is a really a good takeaway. You could take from this being in these rooms, listening to these things that they may not be hearing at this level and being a champion within your organization and an asset strategically on how we can prevent ourselves from risk. And so helping them understand the landscape, so to speak, and figuring out a way to communicate up the ladder, I think is one thing that employers can do. Obviously get active in a variety of different ways. Look at new strategies and redefine what an RFP is.

(41:14):

Redefine your relationship with your consultant. One representing a very diverse range of advisors from brokers to advisors within NABIP across the country. There are many, many choices that will align with your philosophy and what you care about and work strategically with your partner, your advisor, to look at and scrutinize the way that you've procured before, the way that you've partnered before and how you buy set expectations in your contracts. That does set expectations for a level of transparency and data sharing, even if it's not ideal. And begin to come up with a way that you're going to use that information to help you make more informed decisions. And don't use anything as an excuse not to move forward and make them work for you. Yeah, you are tired, you are exhausted, you have allowed on your plate. Allow your partners to work at a different level for you than they have before and require that of 'em, but don't punish 'em for not knowing because a lot of this is, but there's a speed of getting to trust that you must require.

(42:24):

I do want to say from a, we mentioned process, CAA, the consolidated appropriations. I know that's on top of mind for a lot of employers. That's an area that we've been directly involved in this year, especially with the attestations that you're required to have. And many advisors have advised for you to check the box. We only got that option to check or not to check. And so we have gone to the DOL and CMS and had conversations, are you planning to penalize employers for this? As we've identified downstream gag clauses that still exist in those contracts. And they said no. However, not this year.

(43:04):

Not no forever.

(43:05):

Not this year, but come up with a process that seems to be a theme out of this, a document and start sharing or start saving your documentation, your contracts, the language, identify those things and keep them in your file folder because you may need to provide them at some point. And so that's the direction. I think we have a small window of time to get comfortable with this reality. And then we have to kick into gear from an infrastructure perspective. Do you have a benefits committee that you run things by? Don't put all the onus on you because you will be named in these lawsuits if you do have a level of coverage within your infrastructure to support your decision making. And then get involved with organizations like ours that can help you navigate these and be educated on them real time.

 Bob Radecki (43:55):

So it's an important time. Let's watch for and hope for these motions to dismiss to go our way. I know we got plenty of other business to do. So it's not trying to cut off on your business and work with the advisors that know how to help you and help people like Jessica twist arms and make things better in Washington with regulations and laws. And maybe this won't turn out to be as bad as some of us are scared that it's going to be soon. So thank you to the experts that joined us here to share all their information with you.