Corporate America rejoiced when a year-long delay was announced for reporting requirements and enforcement of "pay-or-play" fines under the Affordable Care Act, but there's no rest for the weary. Brokers and their employer clients are bracing for increased penalties for non-compliance with the Health Information Technology for Economic and Clinical Health Act, known as HITECH, slated to take effect this month. "Government auditors aren't on vacation," quips Pete Lewenson, president of Worcester, Pa.-based ComplianceBug, which offers a Web-based service distributed through brokerage channels that keeps employers compliant with laws and regulations. Nor, he adds, "have ERISA, COBRA and HIPAA been overturned, postponed or halted."

Indeed, the U.S. Department of Labor's Employee Benefits Security Administration has stepped up enforcement and hired more investigators or auditors. Nearly $141 million was authorized for various program activities under the sequestration budget in fiscal year 2013, compared with about $128 million in fiscal year 2011. Meanwhile, the number of full-time employee investigators/auditors (inclusive of front-line supervisory staff) increased to 547 from 497 during this time frame.

Greater oversight means various government agencies will have an opportunity to generate more revenue from fines tied to non-compliance with health and welfare benefits laws and regulations. But that's just the tip of the iceberg. "We've seen from their audit requirements that they've gone from 20 bulleted points to nearly 50 points or more depending on what they're targeting an employer for," says Lewenson.


Size matters

Employer size can shape compliance efforts. Lewenson, whose firm is geared toward mid-market employers with roughly 50 to 1,000 lives, says with larger employers there could be confusion over whether the HR, finance or legal departments take care of a compliance obligation (such as review in-plan documents). Whereas small and midsize business executives may assume multiple roles, or lack the expertise to understand details surrounding their reporting requirements or fiduciary duties. This, of course, is where brokers and advisers can help guide them on what needs to be done.

But while many brokers and advisers have adopted online compliance content platforms that allow their employer clients to search for compliance-related topics and download boilerplate forms, these solutions aren't without their drawbacks. The concern with these services is that employers often lose their way "unless they know exactly what they're supposed to be looking for," Lewenson explains, "and if the broker also lacks that in-house expertise, they could be misguiding the employer."

Any negative outcomes could expose advisers to professional liability or malpractice, which their E&O coverage might not cover. "Brokers are trying to feel their way right now in terms of what they're supposed to be providing to clients, and a lot of them don't realize how much a more proactive approach can help protect them from possible risks," he reports. It hasn't helped that many brokers and advisers had been too busy trying to become trusted experts in compliance with ACA at the expense of other employee benefit laws and regs.

"The last thing that I would want to do is try to replace my own brakes, be travelling down a highway with my family in tow, and then all of the sudden realize I didn't do something correctly," Lewenson says. "Just because I may find instructions or a tool to tell me that you could do it on your own, I'd rather have that peace of mind having a professional do it."


Defusing landmines

With the help of their broker partners, Lewenson says mid-market employers need to be more proactive about defusing any non-compliance landmines before deciding whether to pull the trigger on hiring a specialist. The idea is to devise a scorecard approach that assigns a numerical value to various risk factors that then can be measured alongside the probability of fault and potential penalties.

"A lot of businesses have started to adopt key performance indicators and other metrics to be able to run their businesses effectively in dashboards," he observes. "We've adopted that same approach, which provides senior leadership a governance program, which is critical for boards of directors and executives with a personal stake in the business."

Lewenson says the cost of illustrating compliance risk to employers is small compared to the price they would pay if found liable and subjected to penalties. "It's a very worthwhile initiative for the broker to solve that risk ahead of time before an auditor starts knocking on the door of their client," he notes.

Stepping up their role as compliance officer can help brokers and advisers differentiate their practice in an increasingly competitive marketplace. "It's a great business-development tool that's very cost-effective to help put a foot in the door for a prospective client and become a trusted adviser," he says.

It also can help brokers move away from commissions and closer to the concept of fee-based client arrangements, "where they don't necessarily always have to feel as though they have to give it away free to a client and that services have value," Lewenson adds. "It can also help the broker avoid running afoul of state anti-rebating insurance laws."


Shutan is a Los Angeles-based freelance writer.

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