Overview

The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that imposes responsibilities on fiduciaries of self-funded employee health and welfare benefit plans, including group medical, dental and pharmacy plans. In most cases, the employer sponsoring the plan is a plan fiduciary.

When a fiduciary selects a third-party administrator (TPA) to administer medical or dental benefits or a pharmacy benefit manager (PBM) to process prescription claims, ERISA requires the fiduciary to:

1. Select and monitor the TPA or PBM taking into account its duty of prudence and its duty of loyalty to the plan participants and beneficiaries
2. Ensure the plan is being administered in accordance with the written plan document
3. Pay only reasonable plan expenses

Why it Matters

Several recent federal lawsuits regarding pharmacy benefit plans have heightened awareness of the responsibilities of the fiduciaries of self-funded plans (often including plan sponsors).

Even if an employee benefits plan has been audited by a certified public accountant, the financial audit typically will not include rigorous examination of claim processing operations and procedures. A claim processing operational audit will determine whether benefit payments align with plan documents and assist a plan fiduciary to fulfill some of the fiduciary duties described above.

What you can do as a plan fiduciary to help improve ERISA compliance:

• Perform a medical, dental and pharmacy plan claim audit at least every two years
• Regularly review all plan documents to understand the benefits available to plan participants and beneficiaries
• Gain an understanding of all contracts in place, including terms, use of vendors, provider networks and pricing

How We Can Help

For over 30 years, Brown & Brown has helped employers review and monitor the performance of the administrators responsible for processing claims for medical, dental and pharmacy benefits.

Our medical, dental and pharmacy claim audits help to align plan documentation and claim administration. We work with the TPA or PBM and plan fiduciary (such as the plan sponsor) to identify processing errors that should be corrected.

Our medical claim audit reports include a detailed review of the administrator’s operations, corrective actions and statistically valid samples of claims to provide assurance about the accuracy of plan administration. We conduct a separate review of targeted claim samples to identify errors that may not be detected in the random sample alone. Our pharmacy audit reports are created following a 100% review of prescription claims. Final audit report conclusions are based on the PBM’s actual performance compared to contractual guarantees. If discrepancies are found within the PBM’s financial or benefit plan claim adjudication process, the final audit report will include any shortfalls in performance, along with corresponding monetary penalties owed back to the customer.

Following the conclusion of our claim audits and the issuance of final reports, Brown & Brown issues a report summarizing the scope of the audit and how it helps to fulfill a sponsor’s ERISA duties.

Plan fiduciaries are responsible for providing coverage that is correctly administered. Brown & Brown is ready to help.

Employee Benefits Team