The Rise of the Fiduciary Committee

First Retirement Plans & Now Health Plans

For over two decades, 401(k) plan litigation has transformed retirement plan management due to employers’ breaches of their fiduciary duties. These same ERISA fiduciary standards apply to health benefit plans, but employers have only recently recognized the need for similar governance changes.

Lawsuits against major companies like J&J and Wells Fargo emphasize the necessity of establishing fiduciary committees to oversee health plan governance, mirroring the structure already common in retirement plans.

Navigating Competing Interests

As a fiduciary for your company’s health plan, you’re constantly juggling competing interests. On one hand, you have a duty to act solely in the best interests of plan participants and beneficiaries, which may sometimes mean incurring higher costs. On the other hand, you’re responsible for managing plan expenses and ensuring the plan’s financial sustainability.

It can be a delicate balancing act, and the stakes are high.

Managing the quandary requires prudent planning and deliberation. Here are six common scenarios where plan and participant interests conflict:

1. Cost-Containment Measures: Raising deductibles or slashing coverage may cut costs but limits access to essential care. Even modest increases in drug costs can cause patients to skip medications, increasing deaths from conditions like high blood pressure or cholesterol. “Copays kill” is a harsh truth backed by data.
2. High Cost Patients: Breakthrough treatments like many cancer therapies come with staggering costs. Stop-loss carriers often push employers to “laser” high-cost patients, excluding them mid-treatment—a devastating blow to patients fighting for their lives.
3. Conflicts of Interest: When a company serves as both TPA and stop-loss insurer, it may delay or deny high-cost claims to reduce its liability, delaying care for participants, and creating financial uncertainty for employers.
4. Alternative Funding Plans: Some plans shift patients off coverage, forcing them into external drug assistance programs. These schemes often rely on legally dubious tactics, exposing employers to compliance risks and patients to delays and treatment instability.
5. Narrow Networks: Provider networks are thought to cut costs but limit participants’ doctor and hospital choices. In regions without enough specialists, patients face delays, misdiagnoses, and rising out-of-pocket costs seeking care outside the network.
6. Opaque Pricing: Pharmacy Benefit Managers (PBMs) manipulate formularies, take hidden markups, and retain rebates through related third-parties. These unethical tactics increase costs for employer plans while reducing savings passed on to participants.

Finding the Balance: Strategies for Success

Here are some actionable strategies to help you achieve balance and success:

1. Seek Expert, Independent Guidance

• Action: Consult with unbiased benefit consultants, legal advisors, and healthcare advocates who can provide objective advice and insights.
• Action: Ensure advisors are free from conflicts and prioritize the best interests of plan participants.

2. Monitor, Evaluate, and Adapt

• Action: Regularly review plan performance metrics (e.g., cost trends, denial rates, utilization rates, participant satisfaction) and make data-driven adjustments as needed.
• Action: Establish confidential processes for participants to express dissatisfaction with care options, denials, claims, and costs.

3. Gather and Address Participant Feedback

• Action: Conduct surveys, focus groups, or forums to understand employee needs and concerns regarding the health plan.
• Action: Analyze feedback data to identify trends and areas for improvement, and communicate how this feedback is being incorporated into plan decisions.

4. Prioritize Transparency and Open Communication

• Action: Use town halls, newsletters, or forums to update participants on plans and decisions.
• Action: Clearly explain the rationale behind cost-containment measures or benefit changes, emphasizing the long-term sustainability of the plan.

5. Document Every Step of the Decision-Making Process

• Action: Create a clear and consistent process for documenting committee meetings, discussions, and decisions.
• Action: Maintain detailed records of all relevant information, including cost analyses, participant feedback, and expert recommendations.

A Strategic Shift

Now, with a good grounding of the problem, let’s turn to how we can construct a high performing fiduciary committee to manage it.

Traditionally, health plan management resided with “benefits committees” staffed by HR personnel and insurance brokers. Acknowledging the growing gravity of fiduciary responsibilities, “fiduciary committees” now include financial and risk management oversight.

Companies often cite a lack of resources and expertise as one of the big challenges in meeting their fiduciary duties. To bolster their capabilities, and bring a larger perspective to the table, fiduciary committees can also include external healthcare specialists, legal advisors, patient advocates, and communication professionals.

Building The Dream Team

Successful fiduciary committees typically includes representatives from various relevant areas such as:

• Finance: Offers insights on budgeting, cost management, and financial analysis.
• Legal: Ensures compliance with ERISA, HIPAA, and other applicable laws and regulations.
• Human Resources: Provides expertise on benefits, compensation, and communication.
• Employee Representatives: Shares perspectives on plan design and communication.

By leveraging diverse skills and knowledge, the committee can make informed decisions benefiting both participants and the plan.

Establishing Clear Responsibilities

Defining clear roles and responsibilities is essential for an effective committee. Designated individuals or sub-committees can can focus on these major areas:

• Ensuring compliance with ERISA and other regulations: Educating fiduciaries on their responsibilities and staying up-to-date on legal requirements and legal cases.
• Developing and implementing the benefits strategy: Aligning the health plan with participants interests and implementing solutions to drive compliance and cost savings.
• Analytics and reporting: Using claims and cost data to support prudent decision making by understanding current trends and projecting potential improvements.
• Reviewing and selecting plan options: Evaluating different plan designs, solutions, and service providers to optimize cost and quality.
• Monitoring plan performance: Tracking key metrics, such as cost, utilization, denials, and employee satisfaction for different segments of the population.
• Communicating with employees: Providing clear, concise information about plan benefits and changes.

Setting The Foundation For Success

Clear operating procedures are the building blocks underpinning the committee’s effectiveness. Best practices include:

• Charter: Adopting a charter detailing the committee’s responsibilities, including a focus on participant interests.
• Regular meetings: Holding scheduled meetings to discuss plan updates, review performance, and address concerns.
• Agendas and minutes: Preparing agendas in advance and documenting key decisions and discussions.
• Decision-making: Establishing a clear process for making decisions, including voting procedures and conflict resolution mechanisms.
• Subcommittees: Forming subcommittees to focus on specific areas, such as plan design, communication, or compliance.

By following these best practices, you can build a fiduciary committee that’s not just one more administrative meeting, but a strategic asset for your company.

Key Takeaways

1. Adopt a Participant-Centric Mindset: Focus on understanding participant needs, prioritizing their interests, and using data to make informed decisions. A participant-first approach reduces risks and improves outcomes.
2. Build a High-Performing Fiduciary Committee: Assemble a team with diverse expertise—finance, legal, HR, healthcare, and patient advocacy. Include external specialists to obtain expertise and provide an unbiased perspective.
3. Establish Clear Operating Procedures: Create a charter that defines responsibilities, set regular meetings, and use structured agendas. Document every decision with transparency to support compliance and accountability.
4. Communicate Transparently: Keep participants informed about plan updates, changes, and the rationale behind decisions. Transparency builds trust and helps participants understand the long-term sustainability goals of the plan.
5. Monitor and Adapt Regularly: Use metrics like cost trends, denial rates, and participant satisfaction to evaluate plan performance. Be prepared to make data-driven adjustments that align with participant and plan needs.
6. Leverage Technology and Data Analytics: Integrate tools to analyze claims, track spending, and predict trends. This critical capability ensures the committee can act proactively rather than reactively to financial and participant care challenges.