Published on: July 8, 2025 at 3:54 pm
The buck for healthcare benefits administration should not stop with human resources (HR). In fact, top executives need to help ensure that their employees are getting the healthcare benefits and services that they’re paying for. If they don’t, their organization may get sued.
Academy of Management Scholar Jeffrey Pfeffer of Stanford University said that most large organizations have a head of benefits who reports to the head of HR, but the CEO and CFO ought to get involved.
“If you do not clean up how you’re doing your benefits administration and all this stuff continues to go on, you’re going to be liable for suit,” Pfeffer said. “Under ERISA [the Employee Retirement Income Security Act of 1974], employers have a fiduciary duty. “I think I pay $250 twice a month at the moment for health insurance, and my employer contributes some money as well to go to paying Anthem for paying medical claims.
“A university or U.S. Steel or American Airlines or whoever your employer is holds that money in trust for the employees, and under ERISA, they have a fiduciary duty to manage those resources prudently, but most do not do so,” he said.
The same issues facing the healthcare industry can be found in the history of third-party administrators of retirement benefits.
“Retirement benefit administrators were charging too much money and not doing a very good job, and then there were a bunch of class-action cases filed against companies that said, ‘You are not exercising your fiduciary duty,” Pfeffer said. “In about a 12-year period, $6 billion was paid out, and then everybody cleaned up their administration of retirement benefits.
“I can tell you with almost 100% certainty, the same firms that file those class-action cases are going to be filing class-action cases against employers for health benefits under the same claim that the employers have done a poor job exercising their fiduciary duty to manage these benefits for employees effectively,” he said.
