Are You Ready for a Fiduciary Wake-Up Call?
Dr. Nick van Terheyden aka Dr. Nick
Host of News You Can Use
LinkedIn: Nick van Terheyden, MD
X: @drnic1
In this week’s special edition of “News You Can Use” on Healthcare NOW Radio I sat down with Adam Russo, CEO and Co-Founder of The Phia Group, to explore Fiduciary liability and what employers and brokers need to know about health plan oversight. We tackled the often-misunderstood topic of fiduciary liability in health plan oversight. It’s a term that’s being thrown around a lot lately, but what does it actually mean for employers and brokers? In simple terms, being a fiduciary means you must act in the best interest of the plan and be prudent with plan assets. The critical point that many miss is that the company itself, as Adam describes like Walmart, is a separate entity from its self-funded health plan. The decisions, especially on claims, are not made by the company’s executives but by the designated plan fiduciaries, who are legally responsible for following the plan document to the letter.
Listen to the Conversation
Pointing Fingers Won’t Pay the Claim
As Adam shared his Eureka moment from a conference call regarding a million-dollar claim for a CFO’s son, where the broker, the Third Party Administrator (TPA), and the stop-loss carrier all pointed fingers at each other, refusing to make the final decision. Ultimately, the responsibility lay with the plan sponsor, who was completely unprepared for that burden. This is where the conflict of incentives becomes problematic. Each party, the broker, the TPA, and the stop-loss carrier have their own set of incentives. None of them are financially or legally motivated to make that tough call. This lack of clarity and preparedness is a ticking time bomb for employers, leaving them exposed to massive financial and legal risks.
So, what’s the solution? It starts with full transparency and a documented process. Adam suggests that employers need to clearly identify their plan fiduciaries and ensure they have a repeatable, documented process for vendor selection and compensation. While adding new services to manage these decisions might seem like an added cost, it’s far less expensive than the fallout from a fiduciary breach. The key is to build incentive plans for brokers and advisors that reward efficiency and savings but are capped at reasonable levels to prevent abuse.
The takeaway is simple: understand who your fiduciaries are, ensure they have a documented process, and make sure your compensation models are defensible. It’s the only way to stay out of trouble in an increasingly complex and scrutinized healthcare landscape.
Until next week, keep solving healthcare’s mysteries before they become your emergencies.
This article was originally published on the Dr. Nick – The Incrementalist blog and is republished here with permission.
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