Employers’ Do or Die: The Fiduciary Duty in Managing Health Plans

3-minute read

By Jason Andrade

Few benefits professionals I’ve ever met grew up wanting to become employee health plan fiduciaries.

Yet that’s exactly where they find themselves, thanks to the Consolidated Appropriations Act of 2021.

One of the most boring-sounding pieces of legislation ever passed by Congress, the CAA ushered in a dizzying array of healthcare reforms that put the concept of fiduciary duty on steroids.

Few benefits professionals grow up wanting to become fiduciaries. Yet that’s where they are, thanks to the Consolidated Appropriations Act.

That duty, in fact, had already been part of life for every company to have ever offered a health plan to its workers. But the CAA finally gave government regulators the tools they need to crack down on employers who fail to take their fiduciary role seriously.

Regulators, as they are prone to do, are knocking on employers’ doors, rifling through documents, asking lots of questions and, yes, fining companies.

And they’re not the only threat employers need to worry about. There are also the legions of plaintiffs’ lawyers preparing to file class-action lawsuits on behalf of employees alleging, in essence, malpractice in the management of company health plans.

Active Health Plan Management

Maybe it was the pandemic, maybe it was the war in Ukraine, or maybe it was the dry-sounding title of the legislation. For whatever reason, employers just haven’t been paying adequate attention to the CAA.

That, of course, needs to stop.

Employers instead need to take a much more active, more hands-on role in managing their company health plans.

Under the CAA, employers are now expected to ensure that claims paid and fees charged are reasonable, meaning comparable to the expenses and claims experience of similar plans.

It is not enough to pass along this responsibility to a third-party administrator. The fiduciary duty remains with the employer, not the TPA.

It also is not enough to accept the status quo on the cost and quality of care delivered. Employers now must show real effort to drive those costs down and they must endeavor to ensure their employees get the best care possible.

If they haven’t already, employers will want to create a fiduciary committee to handle all the details of managing their health plans, including the hiring and monitoring of TPAs and pharmacy benefits managers.

They’ll also want to document the process the committee uses to obtain, review, and monitor broker and consultant disclosures, benchmarking information, vendor proposals, and vendor performance.

It’s a lot, I know. But there’s even more, so it’s time – it’s really time – to delve deeper, to prioritize, to ask the detailed questions, to get serious about your employee health plan.

Jason Andrade is the Employee Benefits practice leader at The Mahoney Group, one of the largest independent commercial insurance and employee benefits brokerages in the U.S. For more information, contact us online or call 877-440-3304.

This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.




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