Agents are facing ERISA exposures they don’t even know exist. And their E&O policies likely do not provide coverage.
Most people think of ERISA relative to retirement accounts. However, ERISA was expanded to health insurance around 2020. Much of the ensuing litigation involves excessive fees as related to self-funded health plans.
I am not an expert on this issue by any means. However, I have solid knowledge of most insurance agents' lack of knowledge in this space and their exposures. Keep in mind, ERISA suits typically pierce the corporate veil so if you have an ERISA liability, all your assets are on the line. Everything you've ever worked for can likely be attached. Therefore, a prudent agent would learn about their exposures and make a decision to become educated and institute better protocols or eliminate their exposure entirely.
Possibly the biggest risk, especially for agents that only have one or two self-funded health clients, involves TPAs and certain health insurance companies. (And, if you are only dabbling to this extent in self-funding, my advice is that you sell those accounts or otherwise eliminate this exposure because it's probable that you are creating significant other exposures simply due to not living and breathing daily in this complex insurance niche.)
While I wouldn't hold myself out as an expert on this subject, I've done enough work to know that many TPAs are sloppy. TPAs seem to be held as fiduciaries now and the suits are advising the fees they, and maybe some insurance companies, are charging are excessive and illegal under ERISA rules. What have you, the agent, done to:
Ensure your fees are reasonable? Are the fees consistently applied through a formula (almost certainly not in my experience).
Ensure the TPA you've helped your client choose is charging appropriate fees and doing so in a provably consistent manner?
Ensure claims are reviewed to verify the claims are priced correctly?
Verified who is addressing claim recovery?
Verified you are receiving correct information? Are you trusting your carrier reps to deliver correct information and data? If so, you probably should not do so without verification and education.
How much of a stretch is it for an insured, or worse, the Department of Labor who oversees ERISA, to claim that you, the agent, are charging too much? How much of a stretch is it for someone to claim that you, the agent, failed to complete adequate due diligence on the TPA? If you are getting a fee, odds are your standard of care relative to completing due diligence on the TPA is much higher than you are applying.
If you want to learn more, I encourage you to read the DOL guidelines and articles like this: https://www.dwt.com/blogs/employment-labor-and-benefits/2023/08/health-plan-sponsors-excessive-fees-litigation#page=1.
NOTE: The information provided herein is intended for educational and informational purposes only and it represents only the views of the authors. It is not a recommendation that a particular course of action be followed. Burand & Associates, LLC and Chris Burand assume, and will have, no responsibility for liability or damage which may result from the use of any of this information.
None of the materials in this article should be construed as offering legal advice, and the specific advice of legal counsel is recommended before acting on any matter discussed in this article. Regulated individuals/entities should also ensure that they comply with all applicable laws, rules, and regulations.