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Is a "health care coalition" a fiduciary ?


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40 unrelated employers (that practice in the same industry), form a association in order get reasonable medical insurance premium rates for their employees. The "association" contracts with a national insurance company for group coverage and the association hires a professional TPA to process claims & deal directly with the insurance company. All 40 employers send their medical premium payments to the TPA each month.

MY QUESTION:

Each of the 40 employers is the "fiduciary administrator" of its company's medical plan. But none of the 40 employers has a direct policy with the insurance company (There is only one insurance policy contract that the insurance company has in this matter .... namely: the policy is between the insurance company and the "association"). If the TPA refuses to process or pay a claim for a participant ... who can the participant hold legally responsible ?

I would think that he could NOT hold his employer/administrator responsible (even though the administrator is a fiduciary of his plan) because the employer has NO contract with either the TPA nor the insurance company ? Also: Although the TPA gave all participants a copy of the medical plan booklet ...the booklet says that it "is NOT a summary plan description".

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I do not see where the use of the term or word "coalition" is proper.

My major concern is whether the "association" is eligible to offer benefits to employees. The employees are not employees of the association so I question whether they are offering benefits to employees or are they offering benefits to the association members. Vastly differnt tax issues.

My next concern is whether or not the grouping causes the creation of a MEWA and what are your state laws regarding MEWAs.

The next concern is whether or not the "association" meets the state requirement for associations and the requirements of associations formed solely for this purpose.

After all these have been resolved, Then I would address the other issues and raise questions regarding the level of control over the association and TPA that is available (not exercised) by the employers.

This level of control etc will probably decide the fiduciary responsibilty issue.

I am also concerned that there was no SPD given to the employees. An SPD is not required in an association plan because it is not a plan for employees. An Outline of Coverage is sometimes used for associations and what you described sounds like one.

So that again raises the question of whether this is an employee plan or an association member plan.

George D. Burns

Cost Reduction Strategies

Burns and Associates, Inc

www.costreductionstrategies.com(under construction)

www.employeebenefitsstrategies.com(under construction)

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