Health Plan Fiduciary How-To: Isn’t the Fiduciary My Broker, TPA or Carrier?

Q: Isn’t the fiduciary my broker, TPA or carrier?

Jamie Greenleaf, co-founder, Fiduciary in a Box; Julie Selesnick, of counsel, Berger Montague; and Rory Akers, vice president, senior ERISA compliance attorney, Lockton Companies; answer.

A: Usually not, unless they have explicitly accepted fiduciary status in writing. Most contracts with service providers (brokers, third-part administrators and pharmacy benefit managers) disclaim discretionary authority, limiting the service provider’s role to ministerial tasks spelled out in the agreement. In a fully insured plan, the carrier is always a fiduciary with respect to claims and appeals administration. That differs, however, from being the named fiduciary, which is almost always the plan sponsor or an individual employee, committee or board of the employer.

Still, fiduciary status under the Employee Retirement Income Security Act turns on conduct, not job title. A person who or entity that exercises discretion in plan management or administration, or control over plan assets, is a fiduciary to the extent of that discretion or control, regardless of what the contract states.

Even if a service provider functions as a fiduciary in some respect, that does not relieve the plan sponsor or named fiduciary of their own fiduciary duties. Hiring a service provider is itself a fiduciary act, and the plan sponsor or named fiduciary must monitor plan service providers on an ongoing basis to ensure prudent performance. That includes ensuring that (a) the fees paid to service providers are reasonable and (b) the service providers are delivering the contracted services and collecting only the agreed-upon compensation.

Congress reinforced these duties to vet and monitor service providers through the Consolidated Appropriations Act of 2021, which amended ERISA to increase transparency related to health plan service providers. Section 202 of the CAA amended ERISA Section 408(b)(2) to require certain service providers to disclose all direct and indirect compensation that the service provider expects to receive in connection with its services to the plan prior to entering into, renewing or extending a contract.

Section 201 of the CAA added ERISA Section 724 to ERISA (and, for non-ERISA plans, Internal Revenue Code Section 9824 and Public Health Service Act Section 2799A-9), prohibiting health plans from entering into TPA, PBM or other network provider contracts that contain “gag clauses” that interfere with the plan’s ability to (a) share cost and quality information with plan participants, plan sponsors or referring providers; or (b) access electronic claims data and share it with chosen business associates.

The CAA 2021 was enacted to enhance transparency within health care plans and empower employers to fulfill their fiduciary responsibilities. To meet these obligations, plan sponsors must not only obtain access to their data and review required disclosures, but also take deliberate, well-documented steps to verify and monitor that service providers are compliant and acting in the best interests of the plan and its participants.

 

NOTE: This feature is to provide general information only, does not constitute legal advice and cannot be used or substituted for legal or tax advice.

 

Do YOU have a question about health benefit fiduciary duties? If so, we would love to hear from you! Simply forward your question to Amy.Resnick@issmarketintelligence.com with Subject: Health Plan Fiduciary How-To, and the experts will do their best to answer your question in a future column.