Finding the best insurance coverage is typically an informal corporate exercise in which an unsuspecting administrative staff member (aka Fiduciary) may be asked by the employer to find a couple of agents or brokers to supply price quotes. This may give the employer a good evaluation of the health insurance cost, but is the employer actually pricing the right services?
Hiring any service provider is one of the main fiduciary functions. The Department of Labor (DOL) does offer some guidance on hiring service providers because making a bad decision could make a fiduciary personally liable. A fiduciary should apply the same level of scrutiny to every company or individual delivering services to the plan. This would include: insurers, brokers or consultants, third-party administrators, health cooperatives and HMOs.
When was the last time your staff compared the services offered by the broker? Or did your employer buy coverage from a new health Affordable Care Act Cooperative without evaluating its financials?
Fiduciaries need to consider several factors when selecting service providers in the best interest of the plan.
1. Obtain information or quotes from more than one provider. This list should include any firm paid by the employer directly or as a pass through. Interestingly, most brokers are paid by the insurance companies to act in their best interest.
2. Compare service providers based on the same information – experience, cost, plan design, services offered, etc.
3. Obtain information about the service provider and evaluate information about the quality of the firm’s services to include:
a. Identity, experience and qualifications of professionals who will be handling the plan.
b. Any recent enforcement action or litigation that has been taken against the firm.
c. The firm’s experience or performance record.
d. Ease of access to medical providers and information about the operations of the health care provider.
e. Claim resolution procedures and appeal process.
f. HIPPA (or confidentially) status and procedures.
4. Ensure that all licensing and credentialing are up to date.
Require that every service provider submit a contract even if you do not pay them directly. Read and understand the contract, especially the termination provisions. Termination of any insurance contract must be completed in the prescribed manner or the plan could incur unnecessary expenses.
Employers should detail all of the actions and qualifications to be considered by the fiduciary committee in the meeting minutes and record the selection process each year that an evaluation is performed.
One important note for the employer is that each committee member should be educated on their role and the responsibility of being a fiduciary. Unsuspecting staff members acting as a fiduciary could have a claim against the employer if fined for any violations.
Much of the above may seem unnecessary since you never had to do it before, but as noted last month by a recent regulation change, the DOL is going to collect from every employer all the information needed to enforce compliance through the mail.
The Equipment Dealers Association is providing a resource for all its members to avoid fines and get their plan into compliance. Take advantage of the discounted ERISA Edge service offered by TASC and get your plan into compliance before you get the letter.
For more information, visit www.erisaweb.com.
Bill Hill, President of Visor, Inc.