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Caution to TPAs Related to Medical Entities or other outside owners

Many TPA firms are owned by, sisters of, or have contract relations with a hospital, health system, or other form of medical provider (or other type of outside owners who have a product or service related to employee benefits)  That's fine, but raises an extra ERISA fiduciary caution.

ERISA fiduciary duty is two-fold: (1).  To maximize, protect, and very prudently use plan assets, and (2).  To provide every eligible plan participant with precisely what is promised in the plan document and SPD.  "Self-dealing" (any action that might be of any advantage directly or indirectly to youÉ.such as helping a parent or sister company or an investor) is one of the key things DOL looks for and investigates in random and specific-suspicion investigations.  TPAs have to look pure & selfless, and TPAs owned by some other entity need to look extra pure.

ERISA was designed as the ultimate consumer-protection law, especially in fiduciary duty and reporting.  So, some things that might be common practice in general business, finance, or even insurance can bring jail time under ERISA.

So, for example, you don't want to be in a situation where your TPA pays claims submitted for your parent medical entity without the same kind of very prudent scrutiny that it is a legitimate charge and a legitimate price as you'd pay from every other kind of medical provider.    Also, if the client is a bit slow in funding claims, you do not want to be caught having the claims payable to your parent or sister medical entity pushed to the top of the pile ahead of the normal  order in which claims would be paid & sent.  (The latter example would be seen by DOL as an example of  you risking the plan participant, because it increases the chance that his bill will not be funded & paid, and the patient would be billed or bothered directly by the provider.)   In other words, this whole paragraph can be summarized: Don't show any favoritism or even the slightest hint of special consideration for any entity with which you are related

When DOL sniffs something, they tend to imagine the worst.  Since ERISA can be investigated & prosecuted as both civil and criminal (jail time), you don't want to mess around. 

This is not a new idea.  It has been law since 1974, and you are probably fine.  However, sometimes corporate-wide policies or changes accidentally create situations which might be envisioned as a "self-dealing" breach of ERISA fiduciary duty.  So, take some time to think through your processes & policies to be sure that  your operations look purer than pure,  and discuss this with parent officials  if necessary to avoid an embarrassing scandal and anyone ending up in a jail suit.