Vendor management

Benefits Vendor Management

Employer-sponsored health plans involve a complex ecosystem of vendors — carriers, TPAs, PBMs, stop-loss carriers, brokers, and specialty vendors. Under ERISA, plan sponsors have a fiduciary obligation to prudently select and monitor each vendor. Most employers do not have a systematic vendor oversight process — and that gap creates both financial and legal exposure.

Vendor oversight by category

Carrier / TPA

Claims processing accuracy, network adequacy, customer service SLAs, administrative fees, and compliance with plan document terms.

PBM

Formulary management, rebate pass-through, spread pricing, specialty drug management, and contract transparency. PBMs require the most intensive ongoing oversight.

Stop-loss carrier

Attachment point adequacy, laser exposure, claims payment timeliness, and renewal terms. Review the contract annually for adverse changes.

Broker / consultant

Compensation disclosure (required under CAA), services provided, conflicts of interest, and whether the broker is actively managing the plan or just collecting commissions.

Specialty vendors

Utilization, outcomes data, ROI, and integration with the primary health plan. Specialty vendors (DPC, navigation, MSK, cancer) must demonstrate measurable value.

ERISA fiduciary obligations for vendor management

Document the process for selecting and monitoring each vendor — not just the outcome

Obtain and review vendor compensation disclosures (required under CAA for brokers and consultants)

Benchmark vendor fees and performance against market alternatives at least every 3 years

Review vendor contracts annually for terms that may be adverse to the plan or participants

Maintain records of vendor oversight activities for at least 6 years

Act on performance issues — a fiduciary who identifies a problem and does nothing has breached their duty

Common vendor management failures

Renewing vendor contracts without reviewing performance data or benchmarking fees

Not obtaining broker compensation disclosures before renewing service agreements

Allowing PBM contracts to auto-renew without renegotiating pricing and rebate terms

Failing to document the vendor selection and oversight process

Treating vendor management as an administrative task rather than a fiduciary obligation

Audit your vendor fees and compensation

Use our free Fee & Compensation Analyzer to identify hidden fees, undisclosed compensation, and conflicts of interest in your benefits vendor relationships.

Fee & Compensation Analyzer