The Importance of Asking Tough Questions: Holding Your Insurance Broker Accountable and Fulfilling Your Fiduciary Duty

In today’s complex healthcare landscape, managing a self-funded health plan is a significant responsibility for any company. With 350 employees depending on the decisions made by their employer, it’s crucial to ensure that the health plan is not only cost-effective but also provides the best possible coverage. This responsibility becomes even more critical when you consider the fiduciary duty that companies have to their employees—to act in their best interests and to manage the health plan with the same care, skill, and diligence that a prudent person would exercise.

One of the most effective ways to fulfill this duty is by holding your insurance broker accountable. This involves asking tough questions, scrutinizing every aspect of the plan, and ensuring that the broker’s recommendations truly align with the company’s goals and the employees’ needs.

1. Understanding the Financials: What Are You Really Paying For?

When managing a self-funded plan, it’s essential to understand the various components that contribute to the overall cost. Typically, a large portion of the expenses—about 70% to 85%—goes toward medical claims, with another 15% to 25% allocated to prescription drug (RX) costs. Administrative expenses, which include fees for third-party administrators (TPAs), stop-loss insurance, network access, and other services, should ideally range from 10% to 15% of total costs.

However, these numbers can vary significantly based on plan design, employee demographics, and other factors. Therefore, it’s crucial to ask your broker for a detailed breakdown of where every dollar is going. Are the administrative fees reasonable? How much of the total RX costs are being offset by rebates, and are those rebates being fully passed through to the company? These are just some of the questions that can help you gauge whether you’re getting good value for the money being spent.

2. Stop-Loss Insurance: Are You Getting the Best Deal?

Stop-loss insurance is a critical component of any self-funded plan, protecting the company against unusually high claims. For a company with 350 employees, stop-loss premiums typically range from $30 to $60 per employee per month (PEPM). This cost can vary based on factors like the attachment point (the threshold at which stop-loss coverage kicks in), the plan’s claims history, and whether both specific and aggregate stop-loss coverage are included.

Given the potential variability in these costs, it’s important to ask your broker how these premiums are being determined. Are they competitive with what other companies of similar size and demographics are paying? What level of coverage is being recommended, and does it align with the company’s risk tolerance? Ensuring that your stop-loss coverage is both adequate and cost-effective is a key part of fulfilling your fiduciary duty.

3. Commissions and Fees: Who Really Benefits?

Another crucial area to scrutinize is the commissions and fees being paid to the broker and other service providers. Broker commissions can sometimes be built into the premium costs, making them less transparent. It’s important to ask for a full disclosure of all commissions and fees. This includes not only the direct fees paid to the broker but also any indirect compensation they may receive from insurance carriers or other vendors.

As a fiduciary, you have a duty to ensure that these commissions and fees are reasonable and do not influence the broker’s recommendations in ways that may not be in the best interest of your employees. In some cases, it may be beneficial to negotiate a fee-based arrangement with your broker, where their compensation is not tied to the premiums or the specific products they recommend.

4. Holding the Broker Accountable: Are They Acting in Your Best Interest?

Your broker plays a critical role in guiding you through the complexities of managing a self-funded health plan. However, it’s essential to remember that they are a service provider—one that you should hold accountable. Regularly review the broker’s performance. Are they providing the level of service and expertise you expect? Are they proactive in helping you manage costs and improve the plan’s effectiveness? Are they transparent in their dealings and willing to answer the tough questions?

It’s also worth considering whether your broker is helping you explore all available options, including alternative funding arrangements, wellness programs, and cost-management strategies like effective pharmacy benefit management (PBM) or value-based care models. A good broker should not only be a vendor but also a strategic partner who is invested in the long-term success of your health plan.

5. Fulfilling Your Fiduciary Duty: The Bottom Line

As a company managing a self-funded health plan, you have a fiduciary duty to act in the best interests of your employees. This means not only providing quality healthcare coverage but also managing the plan’s costs in a way that ensures its long-term viability. By asking tough questions, scrutinizing the financials, and holding your insurance broker accountable, you can fulfill this duty and ensure that your employees—and your company—are well-served.

In the end, the goal is to create a health plan that balances cost-effectiveness with quality care, ensuring that your employees have access to the medical services they need without placing undue financial strain on the company. By being diligent, transparent, and proactive, you can achieve this balance and fulfill your role as a responsible fiduciary.

Conclusion: Taking Control of Your Health Plan

In the complex world of self-funded health plans, it’s easy to feel overwhelmed by the sheer volume of decisions and details. But by asking the right questions and demanding accountability from your insurance broker, you can take control of your health plan and ensure that it meets the needs of both your employees and your company. Remember, as a fiduciary, you have a duty to be vigilant, informed, and proactive—and that starts with holding your broker to the highest standards of transparency and performance.