Don’t Be Misled by Low Admin Fees for Your Health Plan

SEPTEMBER 3, 2024

Under the Employee Retirement Income Security Act (ERISA), health plan sponsors have a fiduciary responsibility to use plan assets for the exclusive purpose of paying benefits or reasonable plan expenses. Recent litigation targeting employers — including Johnson & Johnson, the Mayo Clinic, and Wells Fargo — highlights a growing interest in pursuing health plan fiduciaries for failing to protect plan members against overpricing.

These recent lawsuits allege a breach of fiduciary duty for failing to ensure that health plan costs — as well as carrier and broker revenue — were reasonable. Facing increasing scrutiny, employers must take steps to improve oversight of how health plan dollars are being spent. A good place to start is a review of your health plan renewal.

Renewals Don’t Reveal the Full Picture

Typical renewals for self-funded health plans only consider overt costs like claims and administrative fees. Renewals that demonstrate a nominal fee increase, or only recommend a carrier based on lower fees, do not consider the additional sources of carrier revenue embedded within the claims expense line.

Aggregated claims costs often include charges for items such as shared savings, network access fees, coordination of benefits, telemedicine, and clinical review, among others. As healthcare costs continue to go up, these fees can add up to hundreds of thousands of dollars in undisclosed revenue for the carrier.

What’s Embedded in Your Renewal?

Shared Savings – Percentage fee charged on carrier network discounts, based on how much the health plan “saved” on out-of-network claims. Shared savings are not accounted for in discount estimations and do not count toward discount guarantees.

Access Fees – Fees charged by the insurance company to access the provider networks that have a negotiated contract with the carrier.

Clinical Review – Carrier fee for clinical review services such as preauthorization, large claims management, and other services meant to reduce overall claims costs.

Brokers who do not have an in-depth understanding of the underwriting process often leave these unanalyzed sources of profit to continue unchecked. Reviewing renewals for hidden fees can give self-funded health plans more negotiating power with the carrier, and help reduce claims-based charges.

See what a fair renewal should look like for your organization. Contact your local USI benefits consultant or email ebsolutions@usi.com to learn more.