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Health Plan Fiduciary Duty: a Foreign Concept? September 14, 2012

Posted by medvision in Uncategorized.
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Recently, I learned of an interesting self-funded health plan design adopted by a midsized multispecialty physician group (600 employees).  Very simply the plan pays nothing until the covered employee incurs $10,000 in a calendar year.  I guess their consultant and HR team assumed the doctors earning $225K will provide care to each other under professional courtesy and perhaps have the plan respond for serious events?

This is probably okay for doctors; however, for every doctor employed, five plus non-physicians are covered.  How does a $10,000 deductible impact the office receptionist earning $500 per week?  For the 500 non-physician employees, I argue that a plan not responding until the sum of $10,000 is spent, ultimately, will create new disease and magnify the severity of existing disease.  How could a fiduciary decide to provide no benefits until an employee’s health status requires $10K out-of-pocket?

Today, our press recounts dozens of instances concerning our national quagmire concerning medical price and health outcomes transparency. Only in healthcare could poor-quality cost much more than high quality (read this eye-opening report: http://tinyurl.com/9c4488c).

During client meetings over the years, I’m always surprised when a benefits VP recounts reoccurring instances of poor quality being received by members at a certain hospital or provider.  How many times have we heard: “I’d never go to ABC Hospital because it’s under-staffed. If you don’t have a family member stay with you, 24/7, you are in trouble.” I find myself thinking to myself: “What?!?”  So your benefits plan is paying this hospital $4 million annually, and you think the quality stinks.  Why aren’t you screaming at the administrator, MCO, network manager? Why aren’t you warning members?

Why is the concept of plan managers acting in a fiduciary manner so foreign in healthcare? Here’s a brief explanation of fiduciary responsibility from the DOL: http://tinyurl.com/2b7r8qd 

In sum:

Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a group health plan and their beneficiaries. These responsibilities include:

  • Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
  • Carrying out their duties prudently;
  • Following the plan documents (unless inconsistent with ERISA);
  • Holding plan assets (if the plan has any) in trust; and
  • Paying only reasonable plan expenses.

Yes, fiduciary responsibility under the DOL, other than stealing plan dollars, is largely paper mache, toothless.  If a “big five” consultant advises a $10K deductible is fine for hourly workers, and it’s administered by a big TPA/MCO, the plan sponsor is in clear air.

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