The Fiduciary Fight!

Insurance companies have long said it is their job to negotiate with doctors, hospitals, and pharmacy providers to get the best, lowest price for plan sponsors. To assist in that promise, Congress amended ERISA laws adding new price transparency requirements in 2020. This means employers should, in theory, be able to compare what they pay for medical care to publicly reported prices. But when companies have attempted to use these new rules to acquire the data, they’ve run into resistance and in some instances have been forced into court.

This has been seen in three recent high-profile cases:

First Kraft-Heinz has accused Aetna of wasting its money by paying fraudulent medical claims. Kraft-Heinz employs over 35,000 individuals. Therefore, they self-insure their health plan using CVS-owned Aetna as a claims processor rather than a traditional plan administrator with the expectation that they will save money. However, according to the lawsuit brought by Kraft, Aetna violated its fiduciary duties in order to enrich itself at Kraft-Heinze’s expense, paying millions for claims that never should have been paid, then preventing the company from determining why. The results of this lawsuit will be determined by how the courts interpret the new laws. Employers, like Kraft, are arguing that insurers are “fiduciaries,” responsible for ensuring employee health funds are spent prudently — the same way managers of retirement plans must act in the best interest of those fund beneficiaries. But insurers say the opposite, they aren’t fiduciaries at all. They say they’re following the terms of their contracts while honoring payment agreements they’ve made with providers. And those contracts don’t require carriers to turn over the data employers are seeking. And best of all, their provider agreements are confidential - meaning they can't be scrutinized for prudence. 

The second high-profile suit alleges Elevance Health, previously known as Anthem Blue Cross Blue Shield, routinely overpaid medical bills. Included in the thousands of claims paid incorrectly is one in which the provider was paid over $120,000 despite only billing the plan approximately $39,000. Even with this evidence and the Department of Labor suing the carrier, the courts determine no wrong-doing as the carrier is not required to act in a fiduciary capacity - again, meaning they are not required to give plan sponsors a good, fair, or even reasonable price. 

If this ruling holds, it leaves employers in a tough spot. They will be the only fiduciary of the health plan while, in some cases, having little to no access to data that is imperative in acting in this capacity and having ZERO ability to negotiate the actual cost of care. These rulings force employers into breaking ERISA laws if they engage in traditional health insurance contracts with traditional health insurance carriers.

What can you do? 

There are still reliable ways to provide healthcare to employees that do not necessitate working with a carrier actively engaged in a legal battle to obfuscate plan sponsors at best and force illegal activity at worst.

The key now is to ensure your benefits consultant is performing regular audits of your healthcare spend. You have heard the classic phrase "C.Y.A." - Until further notice, the employer is responsible for every dollar sent to a medical provider or administrator, whether you are self-insured or in a contract with one of the large carriers named in these lawsuits. Don’t be forced into breaking the law with a take-it-or-leave-it contract.

How we can help!

If your current broker isn’t providing you with regular reports, you need to bring someone in. Maddock Insurance Group can assist you with periodic plan audits as an outside consultant or we can provide full-service advisory that includes regular plan audits at no additional costs.

Initial consultations are free!