In the summer of 2016, over 100 of CIGNA’s self-insured health plan clients were sued with the complaint alleging breach of the defendants’ fiduciary duties under ERISA for engaging in widespread fraudulent behavior involving the use of plan funds. This case should serve as a wake-up call for employers sponsoring health plans nationwide – this will not be the last case of its kind to be filed.
The wake-up call has to do with fiduciary duties arising under ERISA. These duties include:
Much attention has been placed on these duties in the retirement context, inspired in part by the DOL’s release of regulations regarding fee disclosures and recent revamping of the fiduciary rule. However, historically, very little attention has been extended to the application of fiduciary responsibilities to welfare benefits plans.
This is unfortunate because health plans in particular are a type of welfare benefit ripe for fiduciary liability, mainly arising from well-recognized waste in the system. The Economist has reported that fraudulent health care claims consume $272 billion each year and the Institute of Medicine estimated that 30% of all health care spending is unnecessary in its 2013 “Best Care at Lower Cost” report. It is a growing thought among litigators that fiduciaries of health plans have a duty to mitigate this waste.
In order to address this responsibility, plan sponsors of health plans should pursue a more proactive approach to this benefit. Key action-items can include:
The possibilities are only limited by your imagination and, of course, applicable law. The point is to be proactive about your entire welfare benefit structure (but especially your group health plan) and engage appropriate counsel and service providers to guide you through compliant design, implementation, and maintenance. This is an untapped area of cost-containment for many employers. And no one wants to be on the hook for personal liability arising from a breach of fiduciary duties – especially when that liability could reach hundreds of billions of dollars in the aggregate.