The landscape of American health care has undergone significant transformations in the past decade, with the emergence of numerous innovations and cost-saving measures. One of the most impactful developments is the rise of reference-based pricing (RBP), a pricing model proving to be a game-changer for employer-sponsored health insurance plans. This article argues that, given the demonstrated benefits of RBP, CFOs, VPs of HR, and other plan fiduciaries under ERISA are now under a fiduciary obligation to evaluate the potential incorporation of RBP into their health insurance plans – at least with respect to employers that are large enough to consider particularly self-funding their health plans. 

Fiduciary obligations under ERISA

ERISA imposes a fiduciary duty on plan administrators to act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan. To fulfill this duty, fiduciaries must adhere to certain principles, including prudence, diversification, and adherence to plan documents.

The duty of prudence requires fiduciaries to act with the care, skill, prudence, and diligence that a prudent person would use in a similar situation. This duty is not merely a passive obligation; rather, it compels fiduciaries to actively engage in the management and oversight of plan assets, constantly seeking opportunities to enhance the value and cost-effectiveness of the plan.