Hidden fees in employer health plans are about to come out [PODCAST]

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Many companies pay for their workers’ health care directly, and the fees buried in those plans have been hard to see. Paul Pender, an ophthalmologist, explains why new transparency and fiduciary rules taking hold in January 2027 will force these self-insured employers to ask for that data. This episode is based on his article “Self-insured employer health plans face a new reckoning,” published on KevinMD. You will hear why the executives who sign off on these plans can be held personally liable, and how class action lawsuits argue that hidden fees cost employees money. He describes how brokers may shift from retention bonuses paid by insurers to fees paid by the employers they serve, and why employees could see better benefits and fewer surprise bills. He also outlines Our Town Healthcare, a physician-centered plan model set to be tested in two Georgia cities by a company he advises and invests in. Press play to hear why he expects the big players to resist, and why he says employers should have a compliance plan ready.

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Transcript

Kevin Pho: Hi, and welcome to the show. Subscribe at KevinMD.com/podcast. Today we welcome back Paul Pender. He’s an ophthalmologist and adviser to Vxtra Health. Today’s KevinMD article is “Self-insured employer health plans face a new reckoning.” Paul, welcome back to the show.

Paul Pender: Oh, thanks for having me, Kevin. It’s a pleasure. All right, so beforehand, I’m ready to go.

Kevin Pho: All right, good.

Paul Pender: I’ve got all my printed questions ready for it.

Kevin Pho: Excellent. All right. So before talking about the article itself, what led you to write it in the first place?

Paul Pender: OK. I think there are many changes that are coming about in terms of health care policy, and it creates a sense of urgency for self-insured employers. The reason is because they’re now going to be held to a standard of a fiduciary looking out for prudent use of their employees’ health benefits, and therefore they need the data to realize whether their fees that are being charged are reasonable or not.

Kevin Pho: All right. So tell us about the article itself. Tell us, as an employer, you know, what are some things that they need to look out for?

Paul Pender: OK. Well, I’d say that as of October 1 of this year, employers are starting with their enrollment periods, and some of these new rules about transparency and coverage are going to be taking effect as of January, when the new health plans kick in. The reason why I wrote the article is because there are now pressures on these self-insured employers, and it’s actually going to benefit the consumer public.

So I think I want to open with a couple of statements, if I could, and one is, as a disclaimer, I am an investor and an adviser to Vxtra Health.

We enter the age of enforcement of rules that have been effectively skirted by the big players in the past. Working under recent modifications to ERISA and proposed rules set by federal agencies like the Department of Labor, self-insured employers must act as fiduciaries for their employees. The penalties for non-compliance are severe, as the CEOs and CFOs signing off on plans are personally legally liable for prudent decisions that involve expenses affecting employees. Ignorance of the law and rules is not defensible. Court decisions on standing for class action lawsuits continue to evolve. The case made by plaintiffs’ attorneys is that employees suffer monetary damages when hidden fees are extracted from health plans by design. Employers must be given the data from which to make prudent decisions on behalf of their employees.

Kevin Pho: So, as I said, these new rules are taking effect as of January 1. So tell us what the situation was like before January 1 and, just from an employer standpoint, what exactly is going to change, just for people who aren’t familiar with, you know, all the rules and what goes on with self-insured plans.

Paul Pender: OK. So the CliffsNotes approach is that in the early 2020s, there were requirements made to put price information in machine-readable files that hospitals would have to post, so that people could effectively shop for procedures and know it was going to cost them before they actually got treated. But unfortunately, hospitals were really not penalized for not complying, and now they will be.

So what’s really occurred is that the enforcement arm is now going to step up and make sure that self-insured employers follow the rules, so that they are giving the best deal to their employees. So we know that employees often have to pay a percentage of their health premium, including deductibles and co-pays and what have you. If the expenses of the health plan are based on hidden fees by either brokers or hospitals or health insurance companies, then that information is now going to have to come out. As I think one of the headlines in the article that you posted was, the black box is now open.

Kevin Pho: So the prices that, let’s say, a hospital previously gave had a lot of potential hidden fees in them, and then after January, all of those fees will have to come out and there’ll just be an increase in transparency. So it sounds like that’s good for the patient.

Paul Pender: I think it is, and I think that one of the things that we’re following at the company that I advise, Vxtra Health, is that no longer are you given the response that, well, the price is the price, depends on the kind of insurance you have. You know, that’s just not real. And so what people should be able to do 60 percent of the time is shop for the procedures they want and know what they’re going to pay ahead of time, not after they’ve already been treated and they’re getting a surprise bill.

Kevin Pho: So from the perspective of the employers, how will these new rules impact them, positively or negatively?

Paul Pender: Well, they will now be forced to ask for the data that has been kept from them in the past, and they will have legitimate grounds to stand on, because if this information is not revealed, if there’s non-compliance by the people that they contract with, vendors, you know, health insurance companies, or even their own personal brokers who’ve been getting retention bonuses from the health care companies to be able to maximize the census for that particular broker. So now it’s a clean slate, even for the brokers, because now they’ll have to actually be working on behalf of the employer client and not the health insurance company or the private equity arm that basically took them over.

Kevin Pho: So I’m a physician listening to these new rules. Are these new rules going to impact me in any way?

Paul Pender: You know, they’re going to impact the way doctors are going to be paid if they follow some of the aspects of the plan that we’re developing, and I’ll just mention five. If we actually talk about the basic program that’s going to be clinically tested in two cities, Augusta and Gainesville, Georgia, why should doctors really like this particular model called Our Town Healthcare?

One, agency. Clinical decisions are made by clinicians. No prior authorization gauntlet, no formularies chosen by a distant PBM, no utilization review second-guessing. What takes place in the exam room is between the doctor and the patient.

Two, economics. Transparent, fair, prompt payment. No denial games, no 90-day receivables chase, no practice costs getting paid way down the road. And it’s like getting a raise without a rate increase.

Three, time. The model is built on the physician-patient relationship, so visits are sized for care, not RVU throughput.

Four, voice. Physicians help shape the clinical model. Partners in the plan, not line items in a rented network.

And finally, community. Their patients are their neighbors. The employers are local. In Our Town, loyalty flows in both directions, and it shows up in the waiting rooms.

So I think if you start with a core group of docs who have actually experienced the health care mess from both sides of the ledger. If they’re independent docs, they’ve suffered that because they are employers of the practice, and they’ve suffered on the other end because they’re caregivers responsible to their patients but dependent on the reimbursement from health insurance companies. So I think it’s a better model, and we’re about to test it. We consider it a clinical trial in two small cities to be able to have proof of concept there.

Kevin Pho: So in terms of the winners and losers after January 2027, it sounds like the self-insured employers, it’s good for them, because they can see what they’re paying and it could cut waste. The employees, obviously, because hopefully the savings would show up as lower premiums or better benefits. Who are the losers in this scenario? I’m going to assume it’s going to be the insurance carriers or the pharmacy benefit managers. But who comes up short in this scenario?

Paul Pender: Well, I think the best way to describe it is that you start to put the big players on a starvation diet. OK? And I think that if we look at who’s going to suffer, you know, in terms of market share, the big players will still have a commanding presence, but I’d like to see this model be able to take off in a small way and grow by the ripple effect, so that actually you can reduce the drain of the intermediaries.

Kevin Pho: So, just for those, again, who are not versed in, you know, these in-the-weeds rules, so to speak, when it comes to price transparency, if you’re a small employer or a self-insured employer, just give us a sense of a scenario, you know, of what it may look like after 2027.

Paul Pender: OK. So let’s start with the conversation between the broker, who’s now going to be called an adviser, because they too have a fiduciary relationship with the employer. So their fees won’t come out of a black box that is for retention purposes by the health insurance companies. It’s actually going to be paid for services rendered to the client employer. OK. That sets an entirely new clean sheet for the relationship. And then it’s up to the broker to gather that data that’s necessary to make prudent decisions. The brokers may not know about all the rules for transparency and coverage, but they do know if they’re going to be responsible for compliance, and that does change the formula.

Kevin Pho: And then what about for employees and patients?

Paul Pender: I think you hit on it, because the money that you can save can be dedicated to better benefits for the employees, and they will benefit directly. There won’t be hidden fees. They’ll know what their health benefits actually cost.

Kevin Pho: Any red flags that both employers and employees need to look out for with these changes?

Paul Pender: I think it’s because there’s going to be resistance from the big players. They’re going to try to delay being able to provide the data necessary for prudent decision-making by employers, and so that game is going to go on. But I think if you have a compliance plan ready to go, the employers can say, “Look, I’ve already asked for this data. It’s being withheld, and my responsibilities as a fiduciary are dependent on getting the right data.”

Kevin Pho: We’re talking to Paul Pender. He’s an ophthalmologist and adviser to Vxtra Health. Today’s KevinMD article is “Self-insured employer health plans face a new reckoning.” Paul, as always, let’s end with your take-home messages to the KevinMD audience.

Paul Pender: OK. My take-home message is a lot’s going to change, even in the next several months. And I think if we look to the future, we’re going to see a crescendo building towards greater transparency. We believe that we have a really functional model that can work to reduce costs and still improve quality of care.

Kevin Pho: Paul, as always, thank you so much for sharing your perspective and insight. Thanks again for coming back on the show.

Paul Pender: Kevin, thank you so much for having me again.

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