You have an investment committee for your 401(k) plan. You meet regularly. You document the meetings. You benchmark your plan's fees against comparable plans to decide whether what you pay your recordkeeper, investment manager, and TPA is reasonable. If the fees are out of line, you have a process for fixing it. You do all of this because ERISA requires it, and because at some point someone explained what happens to employers who do not.
Now consider your health insurance plan. It is your second largest expense after payroll. It renews every year, often with a steep premium increase and no independent explanation of why. Your broker recommends a carrier. Your TPA tracks the claims. Your pharmacy benefit manager runs the drug spend. Each of them is paid in ways that may not be fully disclosed to you.
Do you have a committee that meets to evaluate your health plan's fees? Do you benchmark those fees against comparable plans? Do you document the process? Most employers do not. Not because they are careless, but because no one ever told them that the same duty they meet for their retirement plan applies equally to their health plan. It does. ERISA says so.
Before 2012, fee disclosure in retirement was largely voluntary, and compensation was buried in expense ratios, revenue sharing, and wrap fees built to be hard to trace. Then Section 408(b)(2) required disclosure. Then litigation began in earnest. Then better tools and better-informed advisors started moving money toward lower-cost, higher-value providers. The industry resisted every one of those forces. Then it adapted. Fees came down. Transparency went up. Participants benefited.
Health insurance is where retirement was in 2008, before the regulation, before the litigation, before the market began to move. The differences are real. Some health providers still actively withhold data that retirement providers were eventually compelled to disclose. Revenue sharing is commonplace and often hidden. Almost no one in the health insurance chain acknowledges fiduciary status, even though ERISA's definition applies whether they acknowledge it or not.
Section 408(b)(2) did more than require disclosure. It created a standard of proof. Once providers had to disclose their compensation, employers had to evaluate it, and “we didn't know” stopped being a defensible answer. Employers who benchmarked and documented their process were protected. Those who had not were exposed.
The Consolidated Appropriations Act can do the same thing for health insurance, if employers treat it as the opportunity it is rather than the compliance burden it appears to be. The disclosure requirements are in place. The fiduciary obligation exists. The benchmarking tool that lets you evaluate what you are being told is being built now.
If you already run this process for retirement, you are closer to the starting line for health insurance than you think. The employers who understand what happened in retirement have a real advantage in what comes next.
Are you one of them?
Part of the Countdown to Change series.