Fiduciary 'Friend or Foe?': Why Vendor Accountability Is Becoming the Defining Issue in Self-Insured Health Plans

Self-insured employers are entering a new era of scrutiny — one where the word fiduciary is no longer a formality buried in plan documents, but a central business risk that touches everything from claims administration to pharmacy contracts and data access.

In the January 2026 issue of The Self-Insurer from SIIA, industry leaders make one message clear: fiduciary responsibility is moving from a compliance topic to a market force — reshaping vendor relationships, compressing margins, and raising expectations for transparency and performance.

The Fiduciary Problem: Title vs. Function

A recurring point across the feature story is that many service providers — benefit brokers, TPAs, PBMs, and carriers — disclaim fiduciary status in their contracts. Yet their real-world actions may tell a different story.

As fiduciary expert Jamie Greenleaf (AIF, CBFA, C(k)P) explains, fiduciary responsibility is duty-related, not title-related. If a party exercises discretion over plan assets, they may become a functional fiduciary regardless of the contract's terms.

That distinction has major implications in litigation, as evidenced by the Sixth Circuit's decision in Tiara Yachts, LLC v. Blue Cross Blue Shield of Michigan, which reopened ERISA fiduciary breach claims against a plan's TPA by recognizing the possibility of functional fiduciary conduct.

Why TPAs Are in the Crosshairs

One of the most pointed viewpoints comes from Stephen Carrabba, who argues that TPAs inherently exercise discretion that directly affects plan assets — how claims are paid, when they're paid, and whether they're routed through integrity programs.

That perspective reflects a growing sentiment across the market: TPAs may not be able to operate indefinitely behind "not a fiduciary" language when plan sponsors (and courts) see the operational reality differently.

A particularly striking example raised in the article is how out-of-network negotiations can create fiduciary exposure. If a vendor is authorized to negotiate up to a threshold and settles below it, they are exercising discretion over plan dollars, which may trigger fiduciary expectations.

The CAA Era: Litigation, Disclosure, and the End of "Trust Us"

Industry pressure has intensified since the Consolidated Appropriations Act (CAA) and the wave of class-action lawsuits alleging fiduciary breach. But as legal experts emphasize, lawsuits often turn on facts and circumstances — whether discretionary authority truly existed, not what vendors say in marketing.

That's why "fiduciary" has become both a competitive marketing word and a litigation trigger. Some vendors use the term loosely, which the article warns can create dangerous confusion for plan sponsors who assume protections or accountability that may not legally exist.

What Employers Are Starting to Demand

A major "looking ahead" theme is the idea that employers will increasingly require co-fiduciary commitments — similar to how the retirement plan market evolved with defined fiduciary roles (e.g., ERISA §3(16), §3(21), §3(38)). The article notes that health and welfare plans don't yet have the same formal fiduciary framework, but many experts believe it's coming.

That shift is already influencing the market:

• Some advisors charge fixed fees and refuse commissions to remove conflicts

• Others operate with the fiduciary mindset, but won't officially adopt the label due to regulatory gray areas and risk

The Mercer Playbook: Five Oversight Moves That Signal the New Standard

One of the most actionable moments in the feature is a Mercer framework outlining five areas where employers should strengthen vendor oversight to reduce fiduciary litigation exposure:

• Understand how vendors use AI in adjudication, pre-auth, and medical necessity decisions

• Scrutinize all fees

• Eliminate gag clauses

• Build in review and inspection rights

• Document fiduciary actions for at least six years under ERISA

This is important because it marks a shift from "vendor management as good practice" to "vendor management as fiduciary survival."

The Bigger Context: Pharmacy Disruption and the New Fiduciary Exposure

While the fiduciary feature centers on plan governance, another major story in the issue highlights how direct-to-consumer drug models and rebate-free announcements could change the economics of pharmacy benefits — and potentially complicate employer oversight.

But the issue also raises concerns employers should not ignore:

• Loss of utilization and claims visibility when purchases happen outside traditional channels

• Potential erosion of benefit design, chronic condition support, and specialty management

• Deductible and OOP credit problems for members

In a fiduciary world, data access is governance. If an employer can't see what's being used, it becomes harder to prove prudent oversight.

Payment Integrity as Fiduciary Strategy

One of the most compelling connections in the fiduciary feature is the idea that fiduciary compliance increasingly runs through payment integrity — not simply because of overpayments, but because of the duties to:

• Monitor service providers

• Ensure fee reasonableness

• Protect plan assets

• Document prudent decision-making

In other words, payment integrity is evolving from a tactical line item to a fiduciary defense mechanism.

And the market is responding. From prepayment claim editing to data access rights and transparency controls, the direction is clear: employers want proof — not promises — that vendors are acting in the plan's best interest.

What Plan Sponsors Should Do Now

Based on the themes and expert commentary in the January 2026 issue, here are practical steps for self-insured employers:

• Re-read contracts like a fiduciary. Look specifically for: discretionary authority language, pricing methodology, review rights, gag clauses/data restrictions, and AI usage disclosure.

• Don't assume your vendors are fiduciaries. If a vendor claims fiduciary alignment, require clarity: Are they explicitly named as a fiduciary in writing? What responsibilities are they accepting? What reporting and documentation will they provide?

• Make "fee reasonableness" measurable. The issue repeatedly emphasizes that excessive or poorly justified fees create both financial and fiduciary risk.

• Treat data access as a governance requirement. To ensure proper fiduciary oversight, access to claims data is everything. It's not negotiable; it's a requirement.

• Build a documentation habit. If litigation is the new backdrop, documentation becomes your best ally. Mercer's view that fiduciary actions should be recorded for six years is a clear signal of where expectations are moving.

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Frequently Asked Questions

What makes a vendor a "functional fiduciary" under ERISA? A vendor becomes a functional fiduciary when they exercise discretionary authority or control over plan assets — regardless of contract language. This can include discretionary claims decisions, out-of-network negotiations, or fee arrangements that affect plan dollars.

How does the CAA affect vendor accountability? The Consolidated Appropriations Act extended §408(b)(2)-style disclosure requirements to health plans, requiring brokers and consultants to disclose all compensation. This has triggered increased scrutiny in litigation and raised employer expectations for vendor transparency.

What should plan sponsors document for fiduciary protection? Plan sponsors should document vendor selection processes, fee benchmarking, claims review findings, performance reviews, and all fiduciary decisions. ERISA requires retaining these records for at least six years.

Why is payment integrity becoming a fiduciary issue? Payment integrity directly relates to fiduciary duties: monitoring vendors, ensuring fees are reasonable, and protecting plan assets. Independent claims analysis provides documentation of prudent oversight that can defend against allegations of fiduciary breach.

What is the Tiara Yachts case significance? The Sixth Circuit's decision in Tiara Yachts, LLC v. Blue Cross Blue Shield of Michigan reopened ERISA fiduciary breach claims against a TPA, establishing that functional fiduciary conduct — not just contract language — determines liability.

The Bottom Line

The fiduciary spotlight isn't going away. Experts at The Self-Insurer predict that lawsuits will continue, service-provider margins will tighten, and employers will demand deeper accountability — potentially pushing more vendors into formal fiduciary roles over time.

Historically, "fiduciary" was often used in legal contexts. In 2026 and beyond, it's becoming a market expectation — and the difference between a well-governed plan and one exposed to unnecessary risk.

Schedule a complimentary consultation to assess your plan's vendor oversight and identify fiduciary documentation gaps before litigation finds them.

What steps has your organization taken to strengthen vendor oversight? Share in the comments.