First Audit Report Provides Peek Into CMS's Handing of NSA Enforcement Initiative

Plans and service providers seeking insight into how the Centers for Medicare & Medicaid Services (CMS) is handling audits under the No Surprises Act (NSA) will want to review the agency's recently released Final Report: Federal Qualifying Payment Amount Audit of Aetna Health, Inc. The report summarizes the audit procedures and findings and, more importantly, discusses what corrective action was required of Aetna Health, Inc. (Aetna) to resolve the audit findings.

According to the report, the audit of Aetna, which covered approximately the first six months the NSA was in effect (January 1, 2022 through June 10, 2022), was limited to air ambulance service qualified payment amount (QPA) calculations and air ambulance services claims subject to the NSA. The report lists the data and documents CMS requested from Aetna and stated that the audit followed standards and procedures established by the National Association of Insurance Commissioners (NAIC) and CMS's Center for Consumer Information and Insurance Oversight (CCIIO). It lists the types of claims, services codes, and statutory and regulatory requirements under review and gives a recitation of the information exchanged between CMS and Aetna during the audit. 

The report lists three violations uncovered in the audit, and the corrective action taken to resolve them: 

Violation of 45 C.F.R. §§ 149.140(b)(1) and (c)(1)(i): Failing to properly calculate the QPA by using claim paid amounts instead of contracted rates and counting each claim as its own contracted rate, even when the claims were for the same amounts for the same item or service and to the same provider of air ambulance services.

• Corrective Action: Recalculate QPAs, refund customers the cost-sharing differential when the recalculation results in a lower QPA, perform a self-audit of affected claims, and report self-audit findings to CMS including, among other things, dates of refund payments to consumers.

Violation of 45 C.F.R. §§ 149.140(d)(1)(iv): Failing to provide a statement that provider may initiate the independent dispute resolution (IDR) process within four days after the end of the open negotiation period.

• Corrective Action: Implement a system upgrade to update non-compliant disclosure language, conduct a self-audit of all claims for air ambulance services to identify impacted claims, and report self-audit results to CMS.

Violation of 45 C.F.R. § 149.140(d)(1)(i): Failing to provide the QPA with an initial payment or notice of denial of payment.

• Corrective Action: Implement a system upgrade which includes adding a QPA field to all disclosures provided with initial payments and notices of denial of payment for items and services for which the QPA applies, reprocess one claim identified during the audit that was impacted by this finding, share the QPA with the non-participating provider, conduct self-audit to identify affected claims, and report results of self-audit to CMS.

The report also includes an "observation" by CMS that Aetna excluded contracted rates from its QPA calculation if there were no claims paid associated with that rate, which was inconsistent with the July 2021 interim final rules. However, the report notes that the pertinent part of the regulation was vacated in court and no violation was cited. The report also states that "CCIIO will use enforcement discretion under the relevant No Surprises Act provisions for any plan or issuer that uses a QPA calculated in accordance with the methodology under the July 2021 interim final rules and guidance in effect immediately before the decision in TMA III for items and services furnished before November 1, 2024."

DOL Issues Report on Pension Risk Transfer Guidance

Last month, the Department of Labor's (DOL) Employee Benefits Security Administration (EBSA) released a report to Congress on Interpretive Bulletin 95-1 (IB 95-1), in accordance with a directive from Congress to EBSA in the SECURE Act 2.0 to review IB-95 and consult with the ERISA Advisory Council to determine whether amendments to the interpretive bulletin are warranted. Department of Labor Report to Congress on Employee Benefits Security Administration's Interpretive Bulletin 95-1. IB-95, issued in 1995, provides guidance on ERISA fiduciary duties as applied to the selection of an annuity provider for the purpose of distributing benefits under a defined benefit pension plan in pension risk transfers (PRT) or "de-risking" transactions. EBSA's review was undertaken while there has been a notably uptick in ERISA class action litigation challenging plan fiduciaries' decision-making in connection with PTRs. 

The report summarizes the history and current trends related to PRTs, as well as stakeholder testimony EBSA received in meetings held as part of its review. Issues identified in EBSA's review include, without limitation, annuity providers' ownership structure, an increase in non-traditional and "riskier" investments by insurance companies that offer annuities, use of offshore reinsurance arrangements by those companies, the loss of ERISA and Pension Benefit Guaranty Corporation (PBGC) protections with PTRs, and the impact of a PTR on a plan's residual funding status. The report also references responses from the NAIC and the Department of the Treasury to inquires from Senator Sherrod Brown (D-OH) "expressing concern about alternative asset managers such as private equity firms being involved in" PRTs.

In the report, EBSA does not make specific recommendations for amending IB 95-1 and states that IB-95 "continues to identify broad factors that are relevant to a fiduciary's prudent and loyal evaluation of an annuity provider's claims-paying ability and creditworthiness." However, EBSA "has not concluded that changes to IB-95 are unwarranted" and the report lists several topics for further study. These topics include whether insurers' ownership structure, exposure to "risky" assets and non-traditional liabilities, use of affiliated and offshore reinsurance, and involvement of private equity firms in the insurance industry expose annuitants to excessive risk, and whether disclosures of the consequences of PRTs to participants and beneficiaries following a partial buy-out are needed. EBSA states that the issues involved are complex and any next steps should involve public notice and comment. 

The report also contains some useful interpretive guidance:

Spousal Rights and Omissions: "In the view of both the Department and the PBGC, if a participant or spouse was inadvertently omitted from an annuity contract as part of a pension risk transfer, the plan would remain liable for the payment of any benefits to which the individual is entitled under the terms of the plan. Further, and more generally, the Department notes that circumstances surrounding omissions of this type may indicate fiduciary breaches by the plan administrator prior to and concurrent with the pension risk transfer, involving recordkeeping and implementing the settlor's decision to engage in a pension risk transfer."

Loss of PBGC Protections: "[W]ith respect to loss of PBGC protections in connection with the selection of an annuity provider, EBSA rejects the view that the settlor's decision to engage in a pension risk transfer means that the plan's fiduciary, in implementing that decision, may be indifferent to the substitution of PBGC coverage with [State Guaranty Association (SGA)] coverage or the extent of the state guarantees."

Partial Buy-Outs: "The safest available annuity standard applies equally in the context of a partial buy-out. The fiduciary implementing the buy-out has a duty of impartiality to all of the plan's participants. If the fiduciary is not able to implement a pension risk transfer without breaching its duty of prudence and loyalty to all participants, the fiduciary may be compelled to seek additional funding from the plan sponsor."

In the News

Joanne commented in Bloomberg Law on Utah v. Su, the case challenging a Biden administration rule addressing environmental, social, and governance (ESG) investing in ERISA-covered retirement plans before the Fifth Circuit. ERISA-type ESG cases are getting "more and more attention in the courts," she said. 

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