Am I a fiduciary for our company's health plan?

If you sponsor a health plan, you are a fiduciary under ERISA, whether anyone told you or not. That means a legal duty to run the plan in the best interest of the people on it, and to pay only reasonable fees for the services it buys. For years most employers treated the health plan as a purchase. The law treats it as a responsibility.

The Consolidated Appropriations Act added real obligations: broker and consultant compensation disclosure, an annual gag clause attestation that your contracts don't block access to cost and claims data, annual prescription drug reporting to the federal government, and mental health parity analyses.

Employees have also started suing large employers, claiming the company mismanaged the health plan, particularly by overpaying for prescription drugs through the PBM. Regardless of how individual cases turn out, the message to every plan sponsor is the same: you are expected to know what your plan pays and why.

You don't have to be perfect. You have to have a process. A prudent plan sponsor reviews vendor contracts and fees on a schedule, collects and reads broker compensation disclosures, benchmarks the PBM every few years, keeps notes on how decisions were made, and has plan documents that match how the plan actually works.

Documentation is your friend. "We reviewed three options and picked this one for these reasons" is a strong answer. "Our broker handled it" is not.

Questions to ask

Who at our company is formally responsible for plan decisions?
Have we filed our gag clause attestation and RxDC reporting?
Do we have current compensation disclosures from every service provider?
When did we last benchmark our PBM contract, and where is that documented?

How do underwriters actually price our renewal?

Your renewal is a number the carrier decides, not one it simply calculates. The underwriter projects your claims, adds trend, blends in a manual rate based on credibility, applies pooling charges for large claims, then adds retention for admin, taxes, commissions, risk, and profit. Every one of those inputs has a range, which is why two carriers can look at the same data and come back 15 percent apart.

When should we start working on our health plan renewal?

Five months or more before the effective date. Requests for quotes typically go out three to four months before renewal for fully insured groups and four to five months out for self-funded and captive groups, because stop loss quotes and lasers depend on current large claim detail. Most renewals fail because they start 60 days out.

Why did our renewal go up when our claims were good?

If you are fully insured, very little of your renewal is based on your own claims. It is driven by a large, generally unhealthy risk pool, and when your claims come in under what the carrier priced, the carrier keeps the difference. Changing how the plan is funded, even with the same carrier and plan, is often what fixes it.