Attention Employers—You are Your Health Plan’s Fiduciary!

Are you managing your health plan like your retirement plan? You should be. 

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The Consolidated Appropriations Act (CAA), enacted in January 2021, clearly states that employers with self-funded health plans have a fiduciary duty to act in the best interests of their employees and their dependents. This means ensuring health plan decisions prioritize value, transparency, and patient outcomes.

Recent lawsuits filed by employees against companies like Johnson & Johnson, Wells Fargo and JPMorgan Chase underscore this responsibility. Paying exorbitant markups—such as 1,000% above drug costs—clearly violates fiduciary standards. 

While the CFO is often the signatory on the plan and may be held accountable, the responsibility extends to senior leadership and the Board of Directors. Much like pension and retirement plans, the governance of employee health benefits is a non-delegable duty under the CAA.

Employers cannot shift blame to brokers or third-party administrators (TPAs). The obligation to manage the plan wisely and transparently falls squarely on the employer—and failing to do so can carry serious consequences.

Despite the many articles, podcasts, webinars, and guidance from industry experts like Jeff Hogan and Chris Deacon, most employers have not taken this fiduciary duty seriously. Meanwhile, health plan costs continue to rise at unsustainable rates—often in double digits annually—with the burden increasingly passed on to employees via higher premiums, co-pays, and deductibles.

A smart first step is forming a fiduciary committee to oversee the health plan. This group might include the CFO, members of the Board, an HR executive, an independent broker or health consultant, and a legal advisor with ERISA expertise. This committee can help ensure full fee transparency, eliminate gag clauses in TPA contracts, and engage data analysts to review claims and spending patterns.

Employers may be surprised to learn that half their total drug spend goes to just a few medications, or that the cost and quality of elective procedures vary widely depending on provider and location. Understanding these details is crucial to making informed, cost-effective decisions.

When I became President of a hospital system in 2015, despite decades in healthcare, I knew more about the cost of printer paper than about our health plan’s drug and procedure spending. That was a mistake. 

Employers today cannot afford to remain in the dark. After salaries, health benefits are often a company’s second-largest expense—yet remain one of the least understood.

Now is the time to fix that.