The Rights & Responsibilities of Plan Sponsors as Fiduciaries
by Kyle Monroe | VP, Network Development & Provider Relations
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:
Benefit Consultants are not fiduciaries, nor generally are Service Providers in self-insured plans. Third-Party Administrators (TPAs), Pharmacy Benefit Managers (PBMs), and carrier contracts often stipulate they are not fiduciaries. Plan Sponsors bear the burden of Employee Retirement Income Security Act (ERISA) compliance and are responsible for their vendor choices.
- C-Suite (CEOs, CFOs, COOs, etc.)
- Board Members
- VPs of HR
- Benefit Administrators.
What It Means to Be a Fiduciary
A fiduciary is bound both legally and ethically to act in their clients’ best interests. ERISA requires fiduciaries to discharge their duties three-fold:
• 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. 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 about adjudicating claims in a particular manner, their defense will always be “we followed the plan’s documents.”
How Self-Funding Can 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 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 necessarily in their best interest.
Broad provider access also does not limit employers to a single health system, and those that do can force employers into paying 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 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.
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.
If you self-fund and want help limiting your risks as a fiduciary, contact us.
Kyle’s responsibilities include creating and maintaining relationships with health systems, clinicians, and other providers to support The Alliance’s strategic goals of improving health care value and organizational growth. He also designs and adopts purchasing and reimbursement mechanisms to accelerate progress toward high-value, safe care delivery.