A CFO’s Guide to Health Plan Fiduciary Leadership
Recent passage and implementation of the Consolidated Appropriations Act (CAA) of 2021 creates new risks and opportunities for employers who self-insure their health benefit plans under the Employee Retirement Income Security Act of 1974 (ERISA).
What Employers Need to Know
The CAA mandates employer access to new and critically important insights into the prices they’re paying for employee health care services – details they have been unable to previously obtain from vendors to whom they pay millions of dollars each year to negotiate on their behalf. Finally, employers can evaluate the cost and quality of services they are purchasing from providers and other vendors and make informed procurement decisions. In fact, the law requires employers to demonstrate that the health care services they buy for their employees are cost-effective, high-quality and meet mental health parity and pharmacy benefit requirements.
This means that employers must take steps to establish oversight procedures and processes to document their efforts to comply with the CAA as fiduciaries, similar to the governance practices employers have already established for their 401(k) and retirement plans.
Implementing an effective health plan oversight and audit framework, with documented procurement processes, can substantially reduce corporate exposure for companies and individual directors, officers and employees. Many employers currently lack adequate controls in their existing service agreements, have historically tolerated unreasonably high fees and costs and often rely upon financially conflicted intermediaries for advice.
The CFO’s Role
It is because of these systemic barriers to compliance that CFO leadership is particularly needed to guide corrective action. Compliance may very likely require companies to adopt new business practices, amend existing health benefit contracts and ensure insurance policies for Directors and Officers cover claims involving employee health plans.
The heightened fiduciary risk of being a health plan manager is occurring at a time of increasing health plan expenses, economic pressures, workforce recruitment and retention challenges and a seemingly insatiable employee demand for immediate, personalized solutions that foster overall well-being. CFOs who embrace a health plan fiduciary framework to mitigate litigation risk may find that compliance opens new opportunities to reduce wasteful health care spending, improve predictability and enable better support for the health and wellbeing of their employees and families.
An Opportunity to Address Workforce Health Challenges
The same health plan data that can help CFOs mitigate fiduciary risk can also unlock opportunities for human resource and benefit leaders to better address workforce health challenges and manage delegated services and vendors. Fiduciary leadership that is aligned across finance, human resources and benefit teams can catalyze a transformation of employee health benefits from a liability to a valuable, strategic asset.