The Employee Retirement Income Security Act (ERISA) is federal law that has formulated rules and minimum standards meant to protect retirement and health plan participants.
An important part of ERISA describes the fiduciary duties assigned to select individuals at companies that offer health insurance benefits to their employees. Typically, these are employers that provide health insurance through plans that are self-funded.
Recently, I spoke with ERISA attorney Adam Russo of the PHIA Group in Boston to discuss how his firm supports health plan sponsors, with an emphasis in the area of fiduciary conduct.
In a recent paper he authored: Fiduciary, Fiduciary… Who’s Got the Fiduciary?, the following paragraph caught my attention.
“In these cases, and others like them, fiduciaries are recognizing their obligation to protect their plan participants, prudently manage plan assets, and forgo the easy path in exchange for the difficult, but rewarding, avenue of fiduciary responsibility. The problem is that there are hundreds of thousands of plan fiduciaries that are not doing these things.
I have written about previous lengthy efforts that were aimed at encouraging large employers in the Dallas Fort Worth area to consider steps that would lead the way to more economically effective bargaining with the DFW area health industry. Recapping those steps were:
- Commitment to a data collaborative, i.e., warehousing employer claims data;
- Analyses of real time claims information to identify how and where dollars were being spent on health care among collaborating employers; and
- Following data analyses, designate and target those top-performing area health care providers (hospitals and physicians initially) with whom negotiations would take place aimed at the formation of a narrow, high-performing network.
Representatives from prominent DFW employers have met and listened to compelling information about collaborative results in a large, highly successful employer coalition in Wisconsin. They’ve heard from a leading health data analytics firm about how data could be mined to identify information needed to bargain with select providers identified as deliverers of high quality and cost-effective health care. In sum, meetings and presentations were intended to convey the message that working together, prominent DFW employers could form an effective economic counterweight to the influence and control of the local health care industry.
No collaborative action was ever taken by these companies. Instead, followup efforts with these employers signaled their intentions to keep working independently in their efforts to control health care costs. The question most frequently asked was … why, when so much more leverage could be exerted by employers who collaborate?
Around the country, colleagues and experts in health care reform efforts have told our DFW activist group that the main weakness in our efforts was the attempt to convince employer HR and benefits representatives to take the actions described. Candidly, we are told that HR/benefits personnel are historically poorly inclined or motivated to pursue innovations viewed as outside-the-box. Furthermore, they are heavily dependent on and easily dissuaded from taking such actions by their insurance companies and consulting firms, because (to insurers and consultants) such initiatives would threaten those firms’ business with employer clients. (We have been told by data experts that even when compelling data is at hand, major corporations have done little with it.)
Subsequent efforts to regroup and take the same message to area CFOs (who many believe should have been the target group in the first place) met with little success. CFOs told us “they have people on it”. Unfortunately, the people “on it” are the HR and benefits personnel from these employers.
That said, a burning question emerges. What are legitimate employer excuses for not taking a hard road described above to solve the dilemma of high cost? If the consultant discourages the employer because the consultant feels threatened, does the consultant bear part of the blame? What about the insurance company that resists data cooperation for self-serving reasons?
Who are the fiduciaries, and where does the buck stop?