Avoiding Legal Pitfalls: Proactive Measures for Group Health Plan Fiduciaries

For a while, I’ve been writing articles for the Fashion Mannuscript, covering a range of topics of interest to our readers. Occasionally, I come across issues that I believe are important and need attention from your company. One such issue has just bubbled up surrounding the reporting and compliance requirements that companies must meet in order to manage their group health insurance plans.

Over the last thirty years, I have worked closely with Michael Rosenthal, an insurance expert and former practicing CPA. Together, we have discussed the changes in group health insurance and related reporting requirements. Michael has recently joined GBS Benefits and provided me with the pertinent information that follows. Please read this and work closely with your advisors to ensure compliance.

As we recently wrote in the article “Enhancing Transparency: New Disclosure Requirements for Agents and Brokers in Group Health Insurance,” there is a new regulatory focus on compliance related to these plans. This has a direct and potentially significant impact on fiduciaries of a company’s welfare benefit plans.

Under the Employee Retirement Income Security Act (ERISA), fiduciaries have an obligation to act prudently and solely in the best interests of plan participants. This includes paying reasonable and necessary fees for services provided to the plan. It is similar to what has existed in the past for retirement plans.

In this article, we are highlighting what we believe companies and their plan fiduciaries should be doing now to protect themselves from any potential liabilities:

• If you already have a plan fiduciary committee for your company’s retirement plans, then add monitoring group health insurance plans as part of the committee’s overall compliance responsibilities. If you don’t have a committee for your plans, you should start one.
• Have the committee hire an independent health insurance professional to review your existing group health plan service provider agreements to determine the following:
  • The scope of services currently being provided to the company and any that should possibly be added.
  • Market reasonableness of the fees being charged by all providers, whether directly to the company or indirectly through commissions paid to insurance agents.
• Detailed documentation of this review process is very important proof that the fiduciary requirements are being formally satisfied.
• If the company doesn’t already have fiduciary liability coverage under its current D&O insurance policy, get a quote from your broker to add that coverage and implement it accordingly.

As an accounting firm, our job is to advise companies of any potential financial exposures that could arise in their businesses. In February 2024, a groundbreaking lawsuit was filed by a class of employees against their company’s Pension and Benefits committee members for alleged negligence in managing their pharmacy benefits plan.

As you can imagine, certain law firms actively seek potential employee plaintiffs who participate in group health plans. In addition to civil litigation, the Department of Labor has increased its investigation activities in the health insurance plan arena.

Please contact your trusted advisors if you need further guidance in this area.

I thank Michael for his input and knowledge in the health care and benefit plan arena, which allows me to keep you informed about industry changes that concern our business community. Until next time, I always conclude with—if you are not having fun, then do something else!