Are You Exercising Your Fiduciary Responsibility?

Federal law requires Plan Fiduciaries to take into account and act for the plan participants best interests. Most employers know that this applies to qualified retirement plans, but may not know that it applies to health plans as well.

Here is the dilemma: how can a plan fiduciary act in the best interests of their employees when they are unaware of what they are purchasing a group health plan through an insurance company? This is because:

  • Employers don’t know what providers are charging
  • Employers don’t know what the arrangements are between insurance companies and providers
  • Employers usually don’t know what the compensation arrangement is between their broker and the insurance companies

Even if an employer is not governed by ERISA (governmental plans, etc.), they are still a plan fiduciary because they are using other people’s money (their employees) to purchase the insurance. How can any employer act as a responsible plan fiduciary in this situation? The answer is that they CANNOT.

Employers have shackles placed on them because they don’t know any of the financial underpinnings of the insurance plans they examine and purchase. Unlike retirement plans, the information they need is held close to the chest by the insurance companies and the providers – they claim it’s proprietary.

Recent legislation has attempted to give employers and employees transparency data from providers, but even if it’s available it’s very difficult to find and navigate through.

Here is the solution:

  • Partially self-fund your benefits using a Third Party Administrator – not an insurance company.
  • Eliminate the PPO network and PPO contracts, thus allowing employees to choose any provider in the U.S.
  • Implement a Reference Based Pricing (RBP) program where everyone knows what providers are going to get paid.
  • Assure that the RBP company is acting as a Co-Fiduciary.
  • Amend the Summary Plan Description/Plan Document to include the pricing methodology being used.
  • Assure high quality member support from the RBP company.

This solution places Plan Fiduciaries in a position to have acted responsibly on behalf of their plan participants. Anything less than this puts them in a place of potential litigation on behalf of their participants and/or providers. If you would like to learn more about how you can put the right plan together for your participants as well as your plan acting as a responsible fiduciary, you can reach me at or 970-349-7707.

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Frank Stichter