- On August 6, 2024
Last week, employees of Wells Fargo filed a lawsuit against their group health plan, Navarro et al. v. Wells Fargo Company, charging their employer plan sponsor with not upholding its fiduciary duty to plan participants. Similar to a case filed last February, Lewandowski v. Johnson and Johnson et al., the plaintiffs in the new lawsuit charged that Wells Fargo’s group prescription drug plan management resulted in higher premiums, out-of-pocket costs, and employee wage stagnation. These two high-profile cases serve as an excellent reminder for group health insurance brokers to discuss fiduciary duties with their group health insurance clients.
For decades, an employer’s fiduciary responsibilities have been paramount regarding retirement plans but relatively overlooked when it comes to group health and welfare plans. However, the Employee Retirement Income Security Act of 1974 (ERISA) establishes that the primary responsibility of a group health plan’s fiduciary is to operate the plan solely in the best interest of participants and beneficiaries and for the exclusive purpose of providing benefits and paying plan expenses.
Some employer decisions relative to their health plan are not considered fiduciary actions, such as establishing a plan, determining the benefit package and plan design features, amending a plan, or terminating a plan; however, decisions regarding plan implementation fall under the realm of fiduciary duty. These decisions include hiring and supervising plan service providers, including health insurance carriers, third-party administrators, pharmacy benefit managers, COBRA and Cafeteria Plan administrators, telehealth providers, and utilization management entities. Employer plan sponsors must thoroughly evaluate all their service providers, including comparing multiple options. The value to the employer and group plans the providers offer for their fees, the quality of service provided throughout the contract, and the reasonableness of costs on an ongoing basis all need to be monitored and documented.
The federal Department of Labor has an excellent free publication explaining the responsibilities of group health plan fiduciaries. As you prepare for the 4th quarter, reviewing this information could help you educate your clients and prepare for any questions they may have about this critical topic.