By Dave Chase
For decades, benefits consultants operated under a simple protective claim: “We just advise.” Schlichter Bogard just demolished that defense & put them on a map no one wants to be on.
Gallagher, Mercer, Lockton, & WTW are named as defendants facing allegations of fiduciary breaches and prohibited transactions. These are not witnesses. These are named parties accused of systematic violations.
The complaints detail compensation structures that would trigger criminal charges in financial services:
→ Commissions reaching 40% of premiums
→ Loss ratios as low as 25-35% — in other words, the commissions are higher than paid out claims
When a consulting firm earns more when you spend more, and earns less when you spend less, whose interests are they serving?
The bundled economics trap exemplifies the problem. Carriers explicitly promote bundling medical with voluntary benefits. They market “the more plans you bundle, the more you can save.” Meanwhile, consultants receive overrides based on combined premium across all product lines.
Bundled economics create bundled fiduciary duties.
The Consolidated Appropriations Act of 2021 required disclosure of ALL compensation tied to health-related services. Four years later, most organizations still receive partial, conditional, internally inconsistent, false, or evasive responses to disclosure requests.
That gap creates massive legal exposure.
Schlichter specializes in turning mathematical impossibilities into legal precedents. When 60-75% of every premium dollar goes to something other than claims, fiduciaries have violated their duty to ensure plan assets are used prudently and solely for participant benefit.
The retirement plan industry learned this lesson the hard way. Major record-keepers restructured their entire business models. Fee compression became industry standard. Fiduciary oversight shifted from optional to mandatory.
Organizations that embrace this transformation early gain competitive advantages. A new wave of retirement advisors won big.
In healthcare, the results speak for themselves: 20-50% cost reductions while providing superior benefits packages.
Julie Selesnick has spent 20+ years litigating against extractive industry practices as a plaintiff-side ERISA attorney. Her assessment of Schlichter’s entry carries weight earned through courtroom experience: “Big consulting firms should be very worried about this.” On Friday, hear Julie provide her analysis, provide the antidotes and answer questions.
Organizations can respond proactively or reactively. One path leads to better benefits at lower costs. The other path leads to depositions, discovery, and potential liability.
Choose wisely.
[Links in the comments below for registering, a deeper analysis & more]
#ERISA #CorporateCompliance #HealthcareReform #FiduciaryDuty
The maps show the 34 companies targeted so far for ERISA fiduciary cases (in health plans). In retirement benefits, there’s ~200 cases per year. Buckle up.
This have been going on for years. The Marsh complaint, 2005 is just one example. It is a common practice still in play today.
