Insurance Consultant On Hot Seat
By Bill Rusteberg
Plan sponsors are taking their fiduciary responsibilities more seriously these days. Anxious attorneys have found a new and lucrative venue.
Health insurance consultants assist plan sponsors in seeking the most competitive health care pricing possible. Most employers rely on PPO networks for best pricing and look to their trusted insurance adviser for recommendations as to which networks offer the better value.
The dilemma facing “expert” insurance consultants is how to evaluate PPO network pricing when managed care contracts are, by definition, secretive agreements between third party intermediaries and medical care givers. You can’t evaluate what you can’t see can you?
The favorite method employed by the “experts” is to conduct a re-pricing exercise on a sampling of claims, actual or made up for this purpose. However, this method is provably flawed and produces meaningless results. (That is entirely another matter deserving of a separate blog entry).
The danger for the adviser who recommends a PPO network becomes evident when promised results or representations indicating “best pricing” proves wrong after the fact. Clearly, as claims are processed and paid, and benchmarked against various data points, a retrospective quantitative analysis may expose the adviser to an E&O claim.
Plan sponsors are taking their fiduciary responsibilities more seriously these days. Consultants who provide poor advice may end up being sued by plan sponsors they serve.
“ERISA is designed to protect employee benefits plans, including retirement and health plans. Under ERISA laws, the people responsible for running the health plans are bound by fiduciary duties. Failure to uphold those duties can result in a lawsuit being filed against the people or organizations responsible for overseeing the benefits plan” –David Chase
Insurance consultants are at risk as never before.