The passage of the Consolidated Appropriates Act of 2021 is proving to be a disruptive force for the health care industry.
One of the key elements of the CAA is that it clearly makes sponsors of benefits plans a “capital F” fiduciary. The reality is benefit plan sponsors under the Employee Retirement Income Security Act have been fiduciaries since 1974. What is different now?
Like with the retirement industry 25 years ago, employers funded 100% of the health benefit plans for their employees, as they did with their retirement benefits. As retirement plans shifted from employer funded to employee funded, that has also happened over the past decade with health care plans. On average, employees are paying 10% to 50% of the cost of their health care – and those costs are increasing every year.
This is the reason why the government is now more focused on health care benefits than it has been in the past. When it is employees' money at stake, the government takes notice. This law brings a significant market opportunity for fiduciary plan advisers.
It is estimated that there are more than 17 million lay fiduciaries in the U.S. today. Many plan sponsors are not aware of the mandates that became effective with the passage of the CAA in December 2020 nor the additional requirements they need to meet this year and thereafter. When a fiduciary does not have the expertise to be able to perform their duties, they are obligated to seek the services of an expert who can.
Many of you will remember what the retirement industry was like before the RIA revolution. How many retirement fiduciary advisers were around 25 years ago? Very few. Which group gained the greatest amount of the adviser market share over the past 25 years? RIAs.
How many health plan benefit advisers sign off as a co-fiduciary on their clients’ health plans today? So far, we have not found one.
Just as we saw with the retirement industry, plan sponsors will be looking for fiduciary support with their benefit plans. Retirement advisers have a huge opportunity to provide oversight. In fact, one national RIA firm has already created a separate entity specifically designed to support their clients’ health benefit plan fiduciary requirements.
The RIA model as we know it today in retirement does not exist in health care. As we saw with the retirement industry, transparency, disclosure and a prudent fiduciary process led to a substantial decrease in plan costs for both employers and their employees, while creating better outcomes. Transparency and disclosure in health care will follow the same path. The only real question is, “Who is going to take market share first?”
Learn about the CAA requirements at the Innovu CAA resource pages.
Francesca Messano is a managing director at Innovu, a firm that works with advisers and employers to identify health care savings.
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