As an employer, you want to ensure that your health plan vendors are providing the best value and services for your organization and employees. However, many employers are unaware of the hidden traps and potential overcharges buried within their vendor contracts. In this comprehensive blog post, we’ll pull back the curtain and reveal the five key red flags you need to watch out for to avoid overpaying and regain control of your health plan.

Red Flag #1: Buried Fees and Lack of Transparency

One of the most common issues with health plan vendor contracts is the lack of transparency around fees and costs. Many contracts don’t list services and fees clearly in the main body of the agreement. Instead, they hide them in sections titled “exhibits” or “addendums.” As a result, most employers don’t know how much they’re actually on the hook for.

To address this, start by asking yourself, “Do you know how much you’re actually on the hook for?” Then, review the “Fees” section, usually buried towards the bottom of the contract, and the last page to check for any attached exhibits. Some contracts even split fees across multiple vendors, with layers of pass-through charges that don’t show up until you request the full schedule. Look for vague language like “your contributions will be used to pay the cost of marketing and administering the plan,” which almost guarantees there are additional fees that aren’t explicitly disclosed.

Always request the full, itemized schedule of fees and match it line by line with the services that are actually being delivered. This will help you uncover any hidden or excessive charges.

Red Flag #2: Undisclosed Vendor Incentives and Conflicts of Interest

Another common issue is when your Third-Party Administrator (TPA) or broker is receiving undisclosed incentives or commissions from the vendors they recommend. This can create a significant conflict of interest, as they may be steering you towards vendors that benefit them financially, rather than those that are truly the best fit for your organization.

Look for contract language like “services may be coordinated through affiliated or non-affiliated partners as needed.” This is often a red flag that your TPA or broker is being compensated by the vendors they’re recommending, and they may not be providing you with unbiased advice.

To address this, ask your vendors directly, “Are you being compensated in any way by the vendors that you’re recommending?” If they hesitate or avoid the question, that’s a clear indication that they’re receiving undisclosed incentives.

Red Flag #3: Locked-in Contracts and Termination Penalties

Some health plan vendor contracts are written in a way that even if you leave the vendor halfway through the year, you’re still on the hook for the full cost. Look for phrases like “early termination is subject to the minimum annual administration fee” or “final reconciliation due upon termination.” This means that the vendor could bill you as if you stayed the entire year, even if you exit early.

Even worse, in some cases, you may be required to forfeit any remaining balance in your claims account or funding arrangement when you terminate early. This is money that you’ve already contributed, and now you’re giving it up because of how the contract was written.

Always review the termination clause in detail and get clarity on any minimum commitments, penalties, or forfeiture provisions. Ensure that you understand the full implications of leaving the vendor before the end of the contract term.

Red Flag #4: Excessive “Run-Out” Fees

Even after you’ve terminated a vendor, you may still be hit with additional charges just to finish processing your remaining claims. Look for language like “run-out will be provided for up to 90 days following termination for a fee outlined in an exhibit.” In other words, the vendor will charge you to pay leftover claims, and this fee is often not clearly spelled out anywhere in the main agreement.

Industry standard practice is for vendors to include 90 days of run-out processing at no additional cost as part of their normal offboarding process. Anything beyond that or any added fees should be negotiated upfront. Always ask, “What’s the run-out fee, how long does it cover, and is it negotiable?” If they try to charge you for something that’s considered standard elsewhere, that’s a red flag.

Red Flag #5: Restricted Access to Your Own Data

Gaining access to your own claims data or providing your broker or consultant with access can be a major challenge with some health plan vendor contracts. One agreement we reviewed stated that you can share information, but only after a confidentiality agreement and mutual agreement on what’s “minimally necessary.” Translation: the vendor controls what data you can access, how much, and when.

This becomes a significant barrier when trying to switch to a new vendor, provide timely reporting to your leadership team or consultants, or simply gain visibility into how your plan is performing. As the employer, you should have full, unrestricted access to all plan data, including claim files, eligibility feeds, and any available reporting. If the agreement creates friction or puts the vendor in control of your information, that’s not just inconvenient – it’s strategic handcuffing.

Take Back Control of Your Health Plan

If this all sounds confusing or you’re unsure where to even start, you’re not alone. That’s why we’ve created a set of plug-and-play worksheets straight from our Benefit Cost Containment Blueprint – the same system we use to help our clients uncover six-figure savings. These worksheets provide clear steps, red flags to watch for, and the key questions you need to ask to take back control of your health plan.

At Benesmarts, we’re passionate about helping employers like you eliminate future surprises, regain control of your health plan, and put you back in the driver’s seat. Don’t let your health plan vendors take advantage of you – take action today and start saving.

Key Takeaways

• Buried fees and lack of transparency are common issues in health plan vendor contracts. Always request the full, itemized schedule of fees and match it line by line with the services being delivered.
• Undisclosed vendor incentives and conflicts of interest can lead to biased recommendations. Ask your vendors directly if they’re being compensated by the vendors they’re recommending.
• Locked-in contracts and termination penalties can leave you on the hook for the full cost, even if you exit the agreement early. Review the termination clause carefully.
• Excessive “run-out” fees after termination are a red flag. Industry standard is 90 days of run-out processing at no additional cost.
• Restricted access to your own data is a strategic handcuffing tactic. You should have full, unrestricted access to all plan data.

Ready to take back control of your health plan? Book a call with us today to learn how our Benefit Cost Containment Blueprint can help you uncover hidden savings and put you back in the driver’s seat.

For more information on our 9-step Benefit Cost Containment Blueprint, check out our video overview. And don’t forget to download our free Mid-Year Health Plan Review Checklist to get started.