Many employer health plans, fidcuaries are easy targets for ERISA suits, researchers warn

The federal Employee Retirement Income Security Act of 1974 requires employers with health plans and retirement plans to act as “fiduciaries,” meaning that the employers should perform their plan oversight duties “solely in the interest of plan participants” and “with the care, skill, prudence and diligence” that a “prudent man” would use in a similar situation.

Richman, a Duke University law professor, and his colleagues explored how well U.S. health plan sponsors were meeting fiduciary requirements by organizing an employer survey in 2022. An outside firm helped the researchers get responses from 221 firms with at least 50 employees.

Even though all of the employers had at least 50 employees, and they were active enough to participate in a health benefits survey, 37% of the survey participants said they did not compare the cost of their health coverage with the cost of health coverage from competing insurers.

“On this basis alone, we find that more than one-third of surveyed employers are likely in violation of ERISA,” the researchers write.

Most employers said they reviewed their plans every year, but “very few employers employed industry-standard performance measures,” the researchers report. “And most employers did very little to measure employee experience, meaning they certainly could not monitor it.”

Richman worked on the paper with Amy Monahan of the University of Minnesota, Sara Singer of Stanford University and Jeffrey Pfeffer of Stanford.

The ERISA fiduciary responsibility backdrop: Health plan sponsors’ fiduciary responsibilities have been getting more attention in recent years, in part because new federal laws and regulations have tried to expand employers’ access to health plan cost data, including broker and advisor compensation data, and in part because lawyers for plan participants have been filing class-action suits accusing health plan sponsors of failing to act like prudent, diligent fiduciaries.

“Comparison shopping and price negotiation may be difficult due to provider consolidation, but this alone does not relieve employers of their duty to make informed purchasing decisions,” the researchers write.