What Best Practices Are Recommended for Benefits Committee Fiduciaries?

Q: Are there specific best practices that a benefits committee should adopt?

Jamie Greenleaf, co-founder, Fiduciary in a Box; Julie Selesnick, executive director, legal and compliance, Judi Group and founder and principal attorney, Health Plan Legal Counsel; Rory Akers, vice president, senior ERISA compliance attorney, Lockton Companies; and Jacob Mattinson, partner, McDermott Will & Schulte, answer below:

Yes. Perhaps the most important best practice is recognizing that overseeing an Employee Retirement Income Security Act health plan is not simply a human resources or benefits function; it involves fiduciary responsibilities. While employers can delegate certain functions to brokers, consultants, third-party administrators, pharmacy benefit managers and other service providers, they cannot delegate away their responsibility to prudently select and monitor those providers.

A strong benefits committee starts with good governance. Employers should establish a committee responsible for health plan oversight and adopt a written charter defining its authority and responsibilities. Committee members should receive fiduciary training so they understand their duties of prudence and loyalty under ERISA and, just as importantly, understand how their health plan operates.

One of the committee’s first exercises should be gathering the plan’s documents, contracts and disclosures. Too often, employers rely on their broker or vendors without fully understanding the agreements governing their plan. The committee should know what it has agreed to, what the plan is paying, how each service provider is compensated, whether conflicts of interest exist, and whether the services and compensation remain reasonable.

Vendor oversight should be an ongoing process, not something that happens only at renewal. Committees should obtain and evaluate required compensation disclosures; review contracts for restrictions, such as prohibited gag clauses; and periodically benchmark or competitively evaluate service providers through a request for proposals or a request for information. The question should not simply be, “Are we happy with our vendor?” but, rather, “Can we demonstrate why continuing to retain this vendor is a prudent decision?”

Data should play an important role in that process. Committees should obtain meaningful claims, pharmacy and utilization data and use it both to evaluate plan performance and to identify areas requiring further investigation. Independent payment-integrity monitoring—reviewing how claims are billed, coded and paid—can also help identify billing errors, overpayments and other inappropriate charges. Having access to data, however, is only the first step. Fiduciaries need to act on the data and document their processes.

Committees should also maintain a compliance calendar addressing applicable requirements such as Form 5500; the annual gag clause prohibition attestation; RxDC reporting of healthcare and prescription drug spending to the federal government; mental health parity requirements; and required participant disclosures. Plan documents, including the summary plan description, should be reviewed regularly and updated as necessary.

Fiduciary prudence is largely about process. There is rarely one “perfect” decision, but fiduciaries should be able to demonstrate how and why they reached their decision.

For committees wondering where to begin: Establish governance, gather and read your contracts, understand who is being paid and how, obtain your plan data, and start asking questions. When the committee does not have the expertise to properly evaluate an issue, engaging an independent expert can be an important part of fulfilling its fiduciary responsibilities.

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.