The National Alliance of Healthcare Purchaser Coalitions (NAHPC) hosted a great webinar detailing the rights and responsibilities of Plan Sponsors as fiduciaries. To help better educate our members on this important topic, we’ve summarized our key takeaways for you, below.
Who Is a Fiduciary?
Anyone who exercises discretion or decision-making over plan assets is a fiduciary – almost always the Plan Sponsor and the Claims Administrator. Typically, fiduciary roles are named in the Administrative Services Only (ASO) agreement. Here are the most common:
- C-Suite (CEOs, CFOs, COOs, etc.)
- Board Members
- VPs of HR
- Benefit Administrators.
Benefit Consultants are not fiduciaries, nor generally are Service Providers in self-insured plans. TPA, PBM, and carrier contracts often stipulate they are not fiduciaries. Plan Sponsors bear the burden of Employee Retirement Income Security Act (ERISA) compliance and cannot delegate their responsibilities away, regardless of what the contract stipulates; Plan Sponsors are responsible for their vendor choices.
What It Means to Be a Fiduciary
A fiduciary acts on the behalf of others, putting their interests above of their own, with a duty to preserve good faith and trust. A fiduciary is bound both legally and ethically to act in their clients’ best interests.
ERISA requires fiduciaries to discharge their duties:
- For the exclusive benefit of plan & participants
- Using the skills of a prudent person
- In accordance with the plan’s documents
The Exclusive Benefit Rule stipulates a fiduciary owns the responsibility to ensure all plan funds and assets are spent in the best interest of the plan beneficiaries. In other words, as a fiduciary, the Plan Sponsor needs to know where every single cent was spent. Violations of the Exclusive Benefit Rule can include:
- Fraud, waste, and abuse
- Negligent claim adjudication (cross-plan offsetting, upcoding, unbundling of claims)
- Sub-agreements the Plan Sponsor may be unaware of
It’s essential to read, understand, and follow your plan’s documents. If you engage in discussion with your TPA or Benefit Administrator about adjudicating claims in a particular manner, their defense will always be “we followed the plan’s documents.”
The Consequences of Breaching Fiduciary Duty
As a fiduciary, you do not necessarily have protection from the plan sponsor – you have personal liability to restore any losses to the plan. Therefore, fiduciaries are advised to obtain some form of umbrella insurance to protect their liability.
Personal liability to restore any losses to the plan resulting from their actions, or inaction can include:
- 20% penalty assessed by the Department of Labor
- Removal from fiduciary status
- Possible criminal penalties
How The Alliance Helps Protect Fiduciaries
If you self-fund with The Alliance, you’re already protecting your plan participants from balance billing. Our contracts stipulate that members are not liable beyond their contractual amounts and your employees are protected by maximum allowable amounts.
Further, our contracts allow employers to “steer” or guide employees to high-value health care options – like Direct Primary Care – emphasizing value over volume. As a fiduciary it is your responsibility to provide these options to your employees, because simply offsetting the costs to the plan member isn’t responsible.
Our agreements don’t limit employers to using a single health system, and those that do can force employers into paying significantly higher costs for the same procedure. And if that employer chooses a less expensive provider than one outlined in their health plan agreement? They are likely in violation of that agreement and the contract becomes null and void, meaning they no longer enjoy its protections.
Lastly, employers who self-fund with The Alliance have access to their data, which is incredibly valuable in terms of fiduciary responsibility. As a fiduciary, you must manage the expenses of the self-funded plan to the lowest-cost, highest-quality providers. You should not defer the management of the plan to your TPA or broker when managing the plan because there’s no way to know if your TPA or broker really has your best interests at heart. Nobody will look at cost quite like you, and we can help you do that by taking a deep dive into your data.
Best Practices to Limit Fiduciary Risk
Many health plans don’t necessarily have those provisions in their contracts, but The Department of Labor has issued Fiduciary responsibility guidance under group health plans, and within it, they lay out some good examples of proper fiduciary duty:
- Handle employee “contributions” in a timely and efficient manner.
- Medical Loss Ratio considerations
- Minimizing fees
- Monitoring service providers
- Maintaining plan’s benefit claims procedures
- Meeting disclosure and information requirements
- Preventing prohibited transactions
Additionally, fiduciaries should follow a three-part checklist to protect their fiduciary liability:
- Have and follow a documented process – Typically, Claims Administrators are selected through a Request for Proposal (RFP) process, but is that process ever revisited? What was the criteria used to select your TPA or Claims Administrator and was it simply that they were the cheapest or had the largest network? These are all good questions to ask.
- Understand what you’ve agreed to in your existing plan documents – If you’ve signed something, do you know what you signed? Do you know if any other agreements exist? What you don’t know can hurt you.
- Establish a program to reconcile your health plan expenditures – Did all the money the plan paid out that you think went to claims go to providers? Transparency is revealing massive financial risk for Plan Sponsors; your agreements can be used against you through contract language, the complexity of 3rd party agreements, and withholding of data. As a fiduciary, you need to see all of your agreements and understand them before signing them.
The 2019 ERISA case of Acosta v. District of Columbia provides a roadmap to navigating fiduciary obligations for health plans. It states that the duty of fiduciaries to monitor requires review at reasonable intervals and includes:
- Review the selection of TPAs
- Monitor service providers
- Renegotiate plan benefits
- Require outside audits (by their choice of auditor)
- Monitor administrative and claims procedures
Fiduciary protection is often overlooked, and as transparency rules emerge in health care billing, data, and hidden fees in your contracts, those changes may impact how your plan assets are being spent and could violate the Exclusive Benefit Rule.
Health plan fees must be monitored, and a good fiduciary process is always the principal defense to fiduciary imprudence claims.
Plan Sponsors bear the risk of and have a significant obligation to ERISA compliance. They should investigate this risk with their benefit consultants to understand their exposure and establish a process for fiduciary protection.
If you self-fund and want help limiting your risks as a fiduciary, contact us.