A portion of the Consolidated Appropriations Act, 2021, addresses the problem of surprise medical billing to individuals, but lawmakers don’t want sponsors of Employee Retirement Income Security Act (ERISA) health benefit plans to be surprised by their bills either.
A part of the broader bill, the No Surprises Act, includes provisions requiring service providers to ERISA group health benefit plans to begin disclosing direct and indirect compensation to plan sponsors. The new law amends Section 408(b)(2) of ERISA, under which service providers to retirement plans have been disclosing compensation since 2012, to include providers to group health plans.
Starting on page 4,475, the bill says, “No contract or arrangement for services between a covered plan and a covered service provider, and no extension or renewal of such a contract or arrangement, is reasonable … unless the requirements of this clause are met.” The bill defines “covered service provider” as a service provider that enters into a contract or arrangement with the covered plan and reasonably expects $1,000 or more in compensation, direct or indirect, to be received in connection with providing broker or consulting services. The bill notes that the secretary of labor may establish in regulations an amount higher than $1,000 in later years to account for inflation.
The bill defines “compensation” as anything of monetary value, but does not include non-monetary compensation valued at $250—an amount which also may be adjusted for inflation by the secretary of labor—or less. “Direct compensation” is compensation received directly from a covered plan. “Indirect compensation” is defined as “compensation received from any source other than the covered plan, the plan sponsor, the covered service provider or an affiliate. Compensation received from a subcontractor is indirect compensation, unless it is received in connection with services performed under a contract or arrangement with a subcontractor.”
Disclosures must include the following:
- A description of the services to be provided to the covered plan pursuant to the contract or arrangement;
- If applicable, a statement that the covered service provider, an affiliate or a subcontractor will provide, or reasonably expects to provide, services pursuant to the contract or arrangement directly to the covered plan as a fiduciary;
- A description of all direct compensation, either in the aggregate or by service, that the covered service provider, an affiliate or a subcontractor reasonably expects to receive in connection with the services to be provided to the ERISA health plan as described in the contract or arrangement;
- A description of all indirect compensation that the covered service provider, an affiliate or a subcontractor reasonably expects to receive in connection with the services to be provided to the ERISA health plan as described in the contract or arrangement;
- A description of any compensation that will be paid to the covered service provider, an affiliate or a subcontractor in connection with the services to be provided to the ERISA health plan as described in the contract or arrangement if such compensation is set on a transaction basis (such as commissions, finder’s fees or other similar incentive compensation based on business placed or retained), including identification of the services for which such compensation will be paid and identification of the payers and recipients of such compensation (including the status of a payer or recipient as an affiliate or a subcontractor), regardless of whether such compensation is also disclosed by one of the methods above; and
- A description of any compensation that the covered service provider, an affiliate or a subcontractor reasonably expects to receive in connection with termination of the contract or arrangement, and how any prepaid amounts will be calculated and refunded upon such termination.
Disclosures of changes in compensation must be made as soon as practicable, but not later than 60 days from the date on which the covered service provider is informed of such change.
Service providers must furnish any other information relating to the compensation received in connection with the contract or arrangement that is required for the covered plan to comply with its reporting and disclosure requirements under the law upon the written request of the responsible plan fiduciary or administrator.
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