The Fiduciary Blind Spot in Self-Funded Healthcare

By David Cardelle, R.Ph., Chief Strategy Officer, Advanced Medical Strategies

Imagine a manufacturer paying millions in supplier invoices through a purchasing agent. At year-end, the agent reports how much was saved against the suppliers’ asking prices, but prices went up 20% from the previous year. The manufacturer gets a discount summary, but little detail to verify whether the invoices were right.

Most CFOs would have questions. Employers should have similar questions about their self-funded health plans.

An insurance company’s name on the member’s card can hide who’s actually paying. In a self-funded arrangement, the employer generally funds the claims. The administrator provides the network and processes payments. A 2025 survey of employer health benefits by KFF reports that 67% of covered workers were enrolled in self-funded plans in 2025. ^[1]

Self-funded employers are substantial healthcare purchasers, in aggregate funding over $1 trillion in healthcare spend, yet many lack the information needed to verify their payments.

Why that gap matters

For private-sector plans governed by the Employee Retirement Income Security Act, or ERISA, fiduciary responsibility is longstanding. Fiduciaries must act prudently, in participants’ interests, and follow lawful plan terms. They also retain responsibility for prudently selecting and monitoring service providers when they delegate work. ^{[2, 3]}

The exposure can extend to the individuals responsible for overseeing the plan. A fiduciary whose breach causes losses to the plan may be personally liable for those losses. Fiduciary status depends on the person’s authority and actions, not simply their title. A high price or an incorrect payment doesn’t, by itself, establish a fiduciary breach. ^{[3, 4]}

But an employer needs a credible answer when asked how it supervises the organizations handling its plan’s spending. A brand name administrator and a favorable discount report don’t answer that question completely.

Federal gag-clause prohibitions have strengthened access to specified pricing information and de-identified claims data. Guidance also addresses restrictions on sharing those data with business associates, subject to privacy requirements. Hospital and insurer price disclosures offer further ways to investigate spending. ^[5]

That’s progress. It still leaves the employer with a difficult job, especially when the claims detail and applicable contract terms aren’t available to them.

A claims file won’t explain whether an implant was separately payable or a specialty drug was billed with the correct units. Published prices can flag a discrepancy, but they don’t establish the correct payment for a particular patient’s claim. Someone has to understand the clinical facts, coding, reimbursement rules and applicable contract.

The discount can hide the question

Take a hypothetical surgical claim. The hospital bills $100,000. The administrator applies the network agreement and pays $60,000. The employer’s report shows a 40% discount.

Now look inside the payment. Suppose it includes a $24,000 implant charge paid separately, even though the applicable contract includes that implant in the surgical payment. Once validated, that finding calls for correction and pursuit of a refund.

Change one fact: the contract allows the separate payment. Comparable pricing still suggests the arrangement is unusually expensive. The payment is contractually correct, but the pricing warrants review. At renewal, the employer should raise the concern with the administrator for discussion with the network.

If the full $24,000 is confirmed as recoverable, the final payment falls from $60,000 to $36,000. The original discount report never revealed that opportunity.

This distinction matters to me because payment integrity and purchasing strategy often get mixed together. A price outlier is a reason to investigate. Calling it an overpayment before reviewing the contract can send an employer into a dispute it shouldn’t be having. Accepting it without examination can leave a real problem untouched.

Useful oversight gives the administrator a finding it can evaluate collaboratively, with enough evidence to explain the concern. It also gives the employer a record of the response and any action taken.

Where I believe the industry is heading

Employers aren’t going to build nursing, pharmacy, coding and claims audit departments inside HR. They need access to expertise that allows them to oversee their administrators’ work without duplicating it.

I expect independent review to become a regular part of managing self-funded benefits, with more attention paid throughout the year. Technology can make that practical by connecting claims with relevant policy, contract and pricing information. AI can help assemble evidence and spot recurring issues. Experienced reviewers still need to validate findings before anyone acts on them.

For an employer, the useful output is a record of what was questioned, why, what the administrator concluded, and whether the issue was resolved. Sometimes the evidence will support the original payment. That conclusion has value too.

Administrators have an opportunity here. A third-party administrator or carrier that makes data usable and works constructively through independent findings gives its clients something meaningful to bring to their plan committees. Brokers and consultants can help establish that process and make it part of vendor evaluation.

Start with data access and a clear agreement about how material concerns will be reviewed, who will respond, and how outcomes will be reported. The process should fit the plan’s circumstances. ERISA doesn’t mandate an AI platform or an independent audit of every claim. Automated screening across claim payments can nevertheless make ongoing oversight practical, with experts validating the findings.

After more than four decades in payment integrity, I believe the next advance will be helping the people who fund healthcare understand and oversee what they’re buying.

Before the next renewal, ask your administrator how it knows your payments are right. Then ask what happens when they aren’t.

About the Author

David Cardelle, R.Ph., is Chief Strategy Officer at Advanced Medical Strategies. A pharmacist by training, he has spent more than four decades in healthcare payment integrity, cost containment and affordability, working as a provider, payer and vendor. He co-founded National Medical Claims Analysts and has developed and led programs responsible for billions of dollars in healthcare savings. He serves on SIIA’s Price Transparency Committee and HPRI’s Payment Integrity Benchmarking Committee. His current work focuses on using healthcare intelligence and technology to improve affordability and support documented fiduciary oversight.