More than 60% of American employees overinsure their health.
You might think, “Wait! I read recently that a lot of people are underinsured, not the other way around. It is certainly a concern, but it is not the only one. Being overinsured means that when employees are presented with the health insurance options offered by their employer, most of them will choose the “wrong” plan and pay more premiums than they should for coverage they don’t. don’t really need.
Why is this important? Because it has cost employers and employees billions of dollars a year, it has made health benefits the second largest item in a company’s profit and loss and has directly undermined the financial well-being of employees. . Now, that could lead to enforcement action, penalties, and class action lawsuits. Studies that highlight the volume of underinsured Americans fail to incorporate two important factors: premiums and plan design. Any analysis of insurance coverage must absolutely take these factors into account. While low deductibles or “first dollar” coverage sounds great, if that coverage is unaffordable, there’s no benefit to it, and employers now have a clear fiduciary responsibility to ensure their health plans provide a benefit to participants.
The law that changed the game
On December 27, 2020, the Consolidated Appropriations Act of 2021 was enacted. It was a massive bill, containing thousands of pages on general government spending, COVID-19 relief spending, and (hidden inside, under the radar) about 90 pages that have sent shockwaves through the employer-sponsored health insurance industry. Here is the key point that all employers and benefits professionals should be aware of:
- Employers are trustees about the health, vision and dental plans they sponsor.
This means that employers have a legal responsibility (among other things) to provide plan members with the information needed to make informed health insurance decisions. To clarify, the Department of Labor issued a field bulletin stating that it “would consider it a reasonable and good faith action for a provider of group health plan services to consider the Department’s guidance on its plan regulation.” of retirement”.
Fiduciary Obligations of Pension Plan Sponsors
In a 401(k) sponsored company, the employer (plan sponsor), with the assistance of a qualified investment advisor, selects the available investment options on behalf of employees. Therefore, the employer has a fiduciary duty to review the funds selected to determine if they are appropriate options for employees. Offering employees the possibility of investing in inappropriate funds (high-cost funds and/or underperforming funds) is an avoidable pitfall for both employees and employers. The employer could be found to have breached its fiduciary duties if:
- The employer does not exercise due diligence to identify the fund as a poor choice, or
- The employer determines that the fund is a bad choice, then chooses to do nothing.
So the employer has to do the research, and if they identify an inappropriate fund, they have to withdraw it. Otherwise, they risk the possibility of DOL enforcement actions, fines, and class action lawsuits.
Fiduciary Duties of Health Plan Sponsors
In health plans, with the help of an insurance broker or advisor, the employer (plan sponsor) selects an insurer or network and develops a plan plan (premiums, deductibles, copayments , maximum disbursements, cost sharing, etc.) . An employee selects a health plan and health care providers. All of these choices have a direct impact on costs and potential health outcomes for employees and their dependents. Choosing a low-deductible plan means higher employer/employee premiums. Choosing a high-cost provider means higher claims costs (both employer and employee). Choosing a poor quality facility could mean inappropriate diagnosis and follow-up treatments, as well as higher claim costs.
The employer therefore has the responsibility to analyze the design of the plan and provide the appropriate information so that each employee can make an informed decision. No employer can guarantee that all employees will make purely logical decisions, but the employer should do their best to remove inappropriate plans or provider options, just as they would remove underperforming funds from available investment options. in a 401(k).
Additionally, employers should encourage employees to identify and select quality, low-cost providers. Price variation in the network is a reality. As new transparency regulations come into effect, it will become more apparent that the same service at two different providers in the network (in the same city or even in the same hospital) can have a huge price difference! So arm your employees with the tools to easily cut through chatter and see pricing and quality reviews. Empower them to balance cost and quality. After all, getting the right diagnosis and treatment will lead to faster healing, better health outcomes, lower claims costs and benefit everyone.
Jed Cohen is co-founder and COO of OneVision. He can be contacted at [email protected].
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