Benefit Fiduciary Liability for Business Owners

In this episode of The Faces of Business, Chris Lokken, Vice President of Employee Benefits at Christensen Group Insurance dives into the topic of Benefit Fiduciary Liability for Business Owners. Chris unravels these complexities and offers actionable strategies to protect your assets and ensure compliance.

In this episode of The Faces of Business, Chris Lokken, Vice President of Employee Benefits at Christensen Group Insurance dives into the topic of Benefit Fiduciary Liability for Business Owners. Chris unravels these complexities and offers actionable strategies to protect your assets and ensure compliance.

Chris is known for his strategic approach to enhancing employee benefits while managing costs effectively. His work is centered around three pivotal elements: Insurance Value & Choice, Technology & Employee Engagement, and Compliance & Administration. Chris has empowered numerous organizations to optimize their benefits structure and compliance strategies. His approach educates employers and engages them in creating a more sustainable and compliant benefits landscape.

Chris brings a wealth of expertise from his extensive career in health insurance and employee benefits, making him the perfect guide through the complex world of fiduciary responsibilities for benefit plans.

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At Christensen Group, Chris has been pivotal in developing innovative solutions that alleviate the burden of benefits management from business owners, allowing them to focus more on their core operations.

Whether you’re navigating self-funded plans or enhancing existing benefits, this session is sure to equip you with the necessary insights to make informed decisions.

Damon commences the Livestream by introducing Chris to the audience. He acknowledges the guest’s deep understanding of the employee benefits. He asks Chris about his background and the factors that drew him to this area where he is today.

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Chris reveals that his journey into the insurance business started in college where he discovered a need while working in individual life and disability insurance. He narrates his initial years of work with business owners who sought help with messy benefits.

Transitioning into independent consulting in 2003, Chris believes in an established benefits system that supports employees during their unexpected challenges. He discusses the consistency in benefits for recruitment and retention, despite rising healthcare costs.

Similarly, the guest advocates for a long-term perspective in benefit planning, drawing from insights in Simon Sinek’s “The Infinite Game” to make his point. Companies must enhance their culture and support employees’ well-being. He discusses the rise in benefit costs over time, particularly in the Midwest. This rise increases deductibles and out-of-pocket expenses for employees. Moreover, the financial strain leads to medical debt and a scarcity mentality regarding healthcare.

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Chris notes a shift in perspective towards focusing on fitting benefits into company culture and addressing employees’ needs, rather than solely pursuing cost-saving measures.

Damon agrees with the guest and requests the guest to talk about privately insured companies.

Chris responds by discussing the various approaches to running employee health plans, including governmental, union, and private sector options. He focuses on the private sector, where he spends the majority of his time.

Chris outlines different strategies for obtaining health coverage, such as accessing the individual market, purchasing fully insured plans, or exploring alternative funding methods. He draws parallels between health plan management and lean manufacturing principles, advocating for efficiency, effectiveness, and customization to fit each company’s culture and needs. He suggests planning and staying proactive year-round rather than reacting to renewal deadlines.

Appreciating the guest’s deep industry knowledge, Damon inquires about significant insights Chris has gained from assisting with health plan development.

In response, Chris shares two significant strategies for managing healthcare plans. First, he discusses the option of offering access to specialized doctors, such as those who have worked with professional sports teams, even if it requires traveling farther. He sheds light on the potential cost savings for employees when deductibles are waived for seeking care from these specialists.

Second, the guest addresses the rising costs of specialty medications and explores ways to mitigate expenses for both the employer and the employee. By leveraging various models and programs provided by pharmacy companies, they aim to reduce out-of-pocket expenses for employees while also saving money for the plan.

Damon discusses benefit fiduciary liability, saying that many business owners may not fully comprehend the risks associated with providing benefits to employees. He seeks Chris’ comments on fiduciary responsibilities under ERISA (The Employee Retirement Income Security Act of 1974) and the potential legal implications for businesses.

Chris begins by clarifying his expertise and role in simplifying complex legal and financial concepts related to employee benefits. He discusses the prevalence of cost fatigue among CFOs and the need for a comprehensive understanding and management of health benefit expenses. Recent lawsuits related to health benefits and pharmaceutical pricing underscore the growing significance of fiduciary liability in the business space. Likewise, Chris stresses proactive measures to address potential litigation and government scrutiny, which can impede business growth and exit strategies.

Chris says that the level of risk depends on the type of healthcare plan people choose. With a fully insured plan, they transfer much of the risk to the insurer, such as Blue Cross Blue Shield. While they ultimately have obligations under ERISA, the insurer still assumes a significant portion of the liability associated with the plan.

In the same way, Chris calls attention to the scarcity of ERISA attorneys and the need for more transparent healthcare contracts. Consultants are adapting to changing regulations to better assist clients. Transitioning from fully insured plans requires careful risk management, including consideration of corporate structure and personal liability. Chris recommends informed decisions, transparent plan monitoring, and potential fiduciary liability insurance as protection measures.

The guest reveals a surprising trend in the insurance industry regarding directors and officers liability (D&O) policies. While its coverage is important, there’s a lack of understanding about its necessity, even among insurance professionals. This stems from a big issue of reluctance to discuss risks openly, often driven by a desire to maintain client relationships or cut costs. Chris warns against vague policies and hidden agendas in insurance practices.

Damon appreciates Chris for the clarification and acknowledges the complexity of healthcare expenditure within companies. He adds that companies can mitigate potential liabilities associated with healthcare expenses by ensuring that they pay according to employees’ needs and interests.

Chris talks about the potential consequences of not properly managing healthcare spending, particularly in light of legal scrutiny exemplified by cases like Blue Cross Blue Shield of Minnesota. Although the complexities and challenges are involved, he encourages a positive outlook while cautioning about the uphill battle of convincing government entities of the nuances of healthcare management.

Toward the show’s conclusion, Damon raises a question about the increasing number of regulations in business over the past few decades.

Chris draws parallels between the evolving status quo of regulatory compliance in business and the practices of agencies like OSHA (the Occupational Safety and Health Administration). It is pertinent to thoroughly prepare and comply to minimize disruptions.

The show ends with Damon thanking Chris for his time.

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Damon Pistulka, Chris Lokken

Damon Pistulka 00:02
All right, everyone, welcome once again to the faces of business. I am your host, Damon pistulka, and I am so excited for our guest today, because we have none other than Chris lachkins going to be here today talking about benefit, fiduciary, fiduciary. That’s a word that I liability for business owners. So benefit fiduciary liability for businesses. It’s a mouthful, but today, we’re lucky, because Chris is going to help us understand this better. Thanks for being here today. Man,

Chris Lokken 00:37
it, it is a big word, isn’t it? Right? Yeah. It’s even hard to spell right, yes, so, and that’s why nobody pays attention to it, yeah, yeah.

Damon Pistulka 00:46
Well, Chris, you you now for people that don’t know you, Chris, you’re currently the VP of employee benefits at Christianson group insurance there in Minneapolis, Saint Paul. You’re helping people all over and in the mini soda Wisconsin, wherever they need this kind of stuff, but it’s always cool. I mean, you’re a special guy, because I don’t know anyone that understands the benefit space like you do. So let’s, let’s just give people little idea of your background and really how you got into benefits. What’s interesting about it to you and and why? Why you do what you do?

Chris Lokken 01:30
Well, it’s I never thought I’d be in the insurance business at this point in time in my life, as is how most people get to the insurance business. The good news is, is I decided that I liked it in college, right? I I found a need. I worked in an individual life and disability business that’s called earning your keep and cutting your teeth and earning your stripes and all that kind of stuff. Yeah, and really realizing that people don’t really like to admit some of the things that are going on, it’s hard to sell life and disability insurance, yeah, to anybody. And then when you’re a 22 year old kid and you don’t know about life, right you, yeah, okay, this is great. So what I had is I had a lot I would call them business owners, and I would call the business owners, and they’d be going, Chris, my benefits are messy. Can you help me with that? Well, I was working for an organization that was about life and disability and financial planning, so it didn’t really work in our structure and all that. So you, you know, you, you learn and to work in the Blue Cross, Blue Shield world for a while, and then you’ll notice I don’t have any hair left. So that started early. Me running into walls frustrated because my mind worked a little bit better than the four walls of an insurance company. So you know for the last that I went out into independent consulting in 2003 that means I’ve been doing this for 20 years. The good news are not even 50 yet. So I’m happy about that, although that’s I only have a couple more months to get away with that. But what I’ve realized is, is it we have a lot of good people working for our companies, yeah, trying to keep them from losing their house or having to, you know, go get third jobs because of things that they didn’t expect to happen. That’s why we have benefits. They be, you know, it’s amazing how, when you look at those, the cycles of the economy and when it was important and what it cost was more important, or benefits and all that how we’ve gone, but it’s amazing how I would say we’ve been at a very consistent path where it’s extremely important for recruitment and retention. Except healthcare costs haven’t gone down anywhere through that process. And healthcare is kind of the it’s kind of the big gem in the middle of the crown of the benefit plan, right? Yeah, we can argue about that and how we got there, but we’re not going to do that today. But ultimately, that’s been the one that’s challenging, and a lot of the other things get forgotten. And then the other thing is, is we’re always in this never ending, ajida, if you will, of renewals and pricing and what’s going to happen. You know, Susie and accounting, this just happened. What are we going to do? Right? People actually think like that. So our job is to build what I found over time is, let’s get thinking a little bit longer term, right? I just got done reading Simon Sinek the infinite game. Right? In that book, it talks about, let’s focus on a little bit further beyond that short term, and different ways companies did that to be successful and and I that’s kind of the approach I’ve taken over time, right? Let’s come up with a plan. Let’s build a process. Let’s do some things. Because a lot of times, when I started in this business, a lot of people. Still doing it right here, here’s a policy. Hey, they save you money this year. Hey, you wanna go golfing, right? All things I are very important, right? But ultimately, that process and how you’re thinking about it, big picture, longer term, where it fits in your culture, how you can use benefits, because you’re spending a crap ton of money on them, yeah, how can you use those to enhance your culture and make a difference in those people’s lives that do the work for your business? And that’s, that’s how you evolve over time. And the good news is, is I’m still be doing that for quite some time. So, yeah,

Damon Pistulka 05:35
yeah. Well, that’s awesome, because this is, I mean, benefits from the other side, the people that just get to pay for it, you know, it’s, it’s become, I mean, when we look back over time, how much have has the average benefit Cost gone up over the last decade? Good

Chris Lokken 06:01
every five to seven years it doubles,

Damon Pistulka 06:05
yeah, yeah, so. So, if it was $500.10 years ago, you’re paying $1,000 per person now,

Chris Lokken 06:14
yeah. So when I started and this now, this is, this is Midwest pricing, right? Yeah, so, but it’s not any different in cost inflation, you’ll Yeah, I’m sure there’s somebody out there that’s going to data geek me and and beat this up. But yeah, I love to look at the numbers, because I like that too. But ultimately, the you know, we were $500 deductible plans. Single rate was 250 250 you’ve got to 300 people. Got a little edgy, right? Well, now I’m looking at a lot of data on plans where the single rate’s almost $1,000 right? Are my deductibles three or $4,000 yeah, right. So there’s two. And now what it’s become is it’s not like, oh, great, I got insurance because a $500 deductible. We had some co pays in there. We did some things you didn’t have a ton of out of pocket. Cost them, yeah, now not only have we, we’ve kind of done both, we’ve raised that cost to the employee on the front end, and we’ve raised that cost to the employee on the back end. And the sad part about it is, is, if you look at the financial statistics, this is some of this is pre inflationary pressures, right? Sorry, we’re getting a little economics on this. But before the inflationary pressures, people’s savings rates and the amount of cash that they had on their personal side of the ledger wasn’t enough to cover that three or $5,000 deductible. So what are they doing their medical debt? I remember medical debt numbers are kind of off the charts. There’s 1000 studies on medical debt, so citing one of them is citing one of them. But ultimately what we’ve done is is now, well, what is the value of my benefit? And we’re actually kind of seeing a pivot and a reverse back, because as we’re managing this, we’re finding that people are functionally uninsured, and they are they’re not taking care of themselves, right? And when a medication is $1,200 a month and you have $400 in your savings account. Guess what? Right? What are you going to do? So that’s kind of we’ve created this scarcity mentality. Yeah, and it’s kind of the house is burning all the time. It is. But ultimately, there’s ways to kind of begin to start thinking about that. That’s kind of the where we’re spending a lot of our time getting out on that front leading edge when the employer is ready for it. The problem is, I see a lot of them running to it, and it doesn’t work well because they haven’t gone through the process and said, How are we going to fit this into our culture? How are we going to make this happen? Because you need to determine that design that’s going to work best for your culture and what you’re comfortable with, because it’s a lot easier for you to bring that in. That’s a much different role, I will say, than probably how I looked at it 10 years ago, right? I would just say, hey, let’s do something really cool and save a bunch of money, right? Yeah, that was pretty good at that, by the way. But now it’s like, how do we fit this into culture? How do you make this part of your rewards? Because there’s not five more people sitting like you talk to our our good friend, Matt KUSI, he can’t get enough machinists, right? Yeah, you know. And if we talk to any machine shop in the country, they can’t get enough machinists, right? Yeah. So it’s, it’s, it’s, there’s not that kind of bench strength out there in the economy right now, from an employment perspective, to say, Oh, if you don’t like it, here’s another option for you, you know,

Damon Pistulka 09:42
yeah, yeah. It is an interesting you know, both from what you said, how much the healthcare costs have gone up for a plan, how much the the people that are using that healthcare have to pay now in maximum out of pocket, and all the other. Things, deductibles, and all the things you got to do in a year now, and how that’s affected that so as In addition, we’re not getting into the benefits of fiduciary liability yet, but I do want to talk about this a little bit because you you deal primarily in the private insurance or privately insured companies explain that a little bit, just so people understand it.

Chris Lokken 10:29
There’s lots of different ways to run an employee health plan, right? There’s I do some work in a governmental space, like I’m a real big aficionado of school districts in Wisconsin, because that’s where I grew up. That’s where my mom and dad were. That’s my Yeah, my hometown was, at that time, was 3800 people. It’s now under 3000 talk about rural economy, that’s a different that could be a whole nother discussion. But so I do work in there, because that’s a passion project for me, because those people are the heart and soul of those little towns, just like the one big employer at the edge of town is as well, right? And but so we work a little bit in that. I don’t work with Union plans a whole lot. We don’t work trying to do things for the state governments. We don’t try to do things for a lot of those other entities. But ultimately, where I’m really focused is primarily in the private sector. You know, 75 to 60% of my time somewhere in there, which means you’re going out and you’re doing something you’re doing you can go, is simple. Now we have benefits where you can say, hey, I’m going to access the individual market. And in some states, that’s really taking hold, where I’m just, I wouldn’t say my benefit is that I’m going to give you a sum of money. You can use it in a marketplace. You can go buy an individual policy. Hard part about that is most people are from a financial wellness perspective. Don’t quite understand that all that well, right? So there’s a lot that has to happen for that to work, but that’s that’s where we start, right? You can do that. You can go and purchase a fully insured plan from your local, you know, health maintenance organization, or HMO, your local their state plans. There’s like, yeah, insurance companies that are limited to certain geographies, and then you’ve got your big name brands, the ones that everybody knows your United Healthcare is your your aetnas, your cignas, your Blue Cross plants. So you can do anything that really you’re saying, Okay, I’m just going to let somebody else handle it. And then where I’ve spent a great deal of my time, whether it’s in the public or the private sector, to be fair, is is actually more in what I’ll call alternative funding. Right where we’re we’re actually saying, Boy, we don’t. There’s some we think there’s extra stuff financially that we could do more efficiently and more effectively. I always go back to the Lean Flow process that you use in a shop, right? Or any type of manufacturing process. And by the way, I’m not an expert in that. We were joking about Peter Drucker before we got on here, right? I forgot about Peter Drucker in my capstone class, all right, but I know lean manufacturing because I sat in the conference rooms and I’ve looked at those charts and I’m fascinated by them. I know nothing about Lean Manufacturing. I just go, that’s pretty cool, right? But ultimately, if we could lean, lean, manufacture your health plan, right, and we could increase the value of what you’re giving people, we could do it more efficiently, more effectively, use technology a little bit better, because those big insurance companies, they’re, they’re like, they’re like a cruise ship, they don’t turn very quickly. We we can use the emerging technologies bring in different concepts, different ideas, and we can customize them. So that’s where, when you you spend a lot of time running into walls, like I did in the insurance company world. And that’s okay. That’s not a bad world. They’re not bad people. But ultimately it gives me the ability to kind of custom craft that solution, fit that into the culture. There are companies that will come and say, I like this solution and I like staying here. I have no problem with that, as long as we understand that there’s stuff on the other side. But if this fits where you’re at today, we’re comfortable with that. It’s just a matter of getting it right, because everybody’s a everybody’s a snowflake, right? Everybody’s a different puzzle for us. And the key is, is a lot of times people don’t spend the time they get, they get caught in a trap. Oh, it’s, it’s, it’s October 15, and we haven’t figured out health insurance yet. And that’s, there’s big companies that, that’s where they start thinking, yeah, yeah, right. It’s really building a overall year round process. So we’re talking about, again, I do a lot of sports officiating. I do I’m way too involved in sports, and I use way too many sports analogies. I will tell you, it’s that a concept of moving without the ball, right? Yeah, let’s move without the ball. Uh, let’s, we don’t have to spend 1215, hours a week on it, but let’s spend a couple hours making sure we’re doing this and then getting people educated so that when we comes time to when the ball now is in the air and we’re playing the game, we can then move you in the right direction, and we can make a lot better this business decisions, because a lot of times it’s done a lot of times it’s done kind of the the opposite way. It’s like, oh crap, our renewal is in 90 days. Oh crap. Is a 25% increase. Yeah, you better go out and fix it. Chris, okay, I can work like that, but it puts a lot of stress on me. It puts a lot of stress on our team. So it’s ultimately, we can, we can get way out ahead of that, right? With data technology, AI, predictive modeling, things that the old guys are learning, right? Yeah. So it’s just, you know, we can get there, right, and then, yeah, figure out and then, and never let, well, that’s just the way we’ve always done it be the answer, right? So, yeah.

Damon Pistulka 16:02
So as you’re doing this, what, what have you learned from helping people put these plans together that that you go, wow, this is pretty big. This is, I mean, this is pretty big. What are some of the big things you’ve seen people do with their health plan, healthcare plans that you go this is cool.

Chris Lokken 16:23
Well, I’ll give you a couple of ideas, right? If you sit in, let’s just say you’re sitting close to where I’m sitting, all right? And I can tell you that you can have any doctor you want, okay? And I can, you can have any doctor you want, by the way, that’s a big deal right there. That’s good, right? But if I tell you that, I can give you a doctor that worked on a professional sports team, and you have to drive an hour, he worked on now I, you know, I live closer to Minnesota, so I got to be careful about, you know, Viking jokes here, right? But

it’s hard, it’s hard, it’s hard. I got

Chris Lokken 17:11
a whole new family that most of them are Viking fans. I got to be a little bit better now, right? Okay, yeah, so, but ultimately, I that provider, and by the way, I just talked to a new client the other day that he actually went to that provider, and his son went to the provider, and he had an MCL repair, and his son had an ACL repair at this particular facility. They didn’t have the same doctor. They have an MCL guy, and they have an ACL guy, okay? So if or I can offer you the guy down the road here, who you know, yeah, he did a he did a shoulder this morning, he did an elbow later in the afternoon, and now he’s going to finish up on your knee, right? So any interesting thing about that is, if I say, Okay, well, Damon, have to pay a couple $1,000 to do the convenient thing by your house. But if you go to the guys who work on sports teams who are specialists in your condition, I’m going to waive your deductible, right? Yeah, that’s some of the stuff we’re doing, right? We’re the funny thing is, the overall net cost on that. When we’re looking at the claims data and the things that happen, you’re seeing a variance there of somewhere in area, 150 200% sometimes depending upon the contract and the relationships that you have, right? Yeah, so that that’s one of them. The other thing is, is a lot of employers, it’s starting to happen a lot more, and it’s working so well that some of the manufacturers are trying to keep it from happening. The cost of our some of our specialty medications, they’re fantastic, right? I’ve always believed that maybe we, yeah, it’s expensive, but if I can keep somebody out of the ER five times in a year, I don’t know how much. I don’t know I the cost of that is expensive too. Plus, yeah, we’re disrupting them. Yeah, I was in the ER last night. I was in the air last night with my spouse. Am I really coming when I’m walking into my to my job and running the CNC machine. Am I really at work that day? Right? I’m more I’m in a white color world, right? You can be at work and not be at work, right? Yeah, we all have had those days, right? So, but ultimately, in that space, am I really getting, am I really getting the best out of my people, and am I setting myself up for other things, errors, injuries, yeah, all that other kind of stuff that that happen on a shop floor and or a manufacturing facility. How does that? How does that play out? So I always believe it’s there’s a trade there, but I will tell you when it’s a quarter of a million dollars for, you know, one medication, yes, year, we have to do that. So what we’re doing is. There’s ways to use different types of models as far as whether we’re sourcing it or how we’re paying for it, and different things that the pharmacy companies have put money into. Yes, you see some of them on TV when they talk about the drugs that they’re selling you, but ultimately, there’s some even deeper programs that we can leverage and then basically try to get so if somebody has a five that or $5,000 deductible, they’re going to pay the full cost of that medication till they meet it. We’re able to bring it to them for zero cost, right, or a very small cost. And then we’re also Saving the plan money using some of the other avenues that we have. I will tell you, it’s not a perfect solution, because we’re we’re dealing with a health care and a pharmaceutical distribution, procurement development system that has just has a lot of mess and cost and waste in the thing. And so it’s not a perfect solution. It’s probably not a forever solution, but at least it’s a start, right? Yeah, start putting those things in. And I will tell you the people that we’ve been able to hand medications to that were, you know, crying when I do the enrollment meeting, yeah, because they were just had another $5,000 deductible, and they’re on Enbrel or something like that. Well, you know what I said, Hey, we’re gonna, we’re gonna figure out a way for you to not have to pay for any of that. They go, Whoa, what did you just do for your employees? Right? When that happens, yeah, what’s, what’s that $5,000 mean in their household? Right? What does that mean for their kids? What does that mean for their families? And by the way, they’re not. You do that for people’s families. It’s amazing how they’re now, all of a sudden they come in, they put a little bit extra in, you know, and, and it’s all, it fits into that culture. So that’s kind of the things we’re trying to that’s just a couple ideas, right? Yeah, it’s get you the better opportunity to get better faster, and maybe have you spend less money, right? So,

Damon Pistulka 21:56
yeah, well, you make a great point. And I hadn’t thought about like this before. It’s, it’s is that, you know, if I’ve got an employee who’s got a family member that we really can’t and just say we just can’t, plain old, afford the medicine they need, that means I’m probably going to be in that emergency room or in that hospital a lot more with that person, because we can’t. So we get that, how much of a difference we get that medicine for a reasonable price that we can live with, then we turn around and they’re better in better health. I want to be able to come to work and be a lot more productive,

Chris Lokken 22:32
absolutely right? And, yeah, because it’s a it’s that’s why we have the benefits, right? Yeah, you know, if we just, if we wanted to as a system since World War Two, if we wanted to get rid of this, we would have got rid of this a long time ago, right? I think big picture, longer term, but it could be wrong on that. But,

Damon Pistulka 22:52
yeah, yeah. Well, that’s good stuff. Well, you know, today we want to talk a little bit about fiduciary, you know, benefit, fiduciary liability. It starts with ERISA and and, and, you know, because business owners don’t realize just by having benefits, because they have to have them right, have to have them because they want to do the right thing, because they need to be competitive, and they, you know, sometimes it’s mandated, but they don’t often understand all the risk and liability that comes with that. So let’s talk about that a little bit.

Chris Lokken 23:27
Okay, sounds good? First thing, right? I have to make sure that I get up my, my, my manual teleprompter, yeah, okay. I’m not a JD, and for those of you who are playing along for the Midwest. That’s not, I’m not a, not a John Deere. That means I’m not an attorney, and I am not a CPA, Alright, got that out of the way. What I am, though, and what I’ve realized is, is that I’m a really pretty okay quarterback, all right, I’m not the GM, I’m not the I’m not the I’m not the head coach, right? And that’s probably about those people, from a legal perspective, where they where they probably come in, and I’m the person that’s out there, to try to execute the place in the process around it, you know, and and then the other thing is, is to try to take how CPAs and attorneys look at it, and try to break it down so it’s digestible. Yeah, that’s it. I think reason we’re in some of the spots we are with some of this stuff is because we we actually psychologically reject it, because we don’t understand it, right? I always, every time I have one of these conversations, I know she’s still out there. Motivational speaker from 25 years ago, Gal by the name of Eloise Owens. She went and studied surfers. She’s middle aged lady, goes out and studies surfers, right? And what she learned is that when knowledge is low as fear is high, right? So what I do is I go away from that, right? And then the. Other one was, you always go where you look right. Always look forward. Don’t look down, because you go in the water right. If you thought we just were turning in to see what this is about, you learn about surfing. Now. We’re ready to serve. Here we go, right. So, but ultimately, it’s I find that they we don’t have a process, we don’t have that ability to have a safe space to learn. So we just avoid it, and we by doing that, we’re actually assuming risks in our business financially that we don’t know we have, yes, and ultimately, we’re self insuring them without doing anything, because if we get a fine from the government, guess what, we’re going to have to write the check if we don’t have any backup, right? Yeah, you know, so, so that’s kind of where we’re looking at it. This stuff has been around for a long time. The funny thing is, is it has, you know, it’s interesting that health plans, in some way, shape or form, no matter where they come out, are ruled by ERISA, which is actually a Retirement Law, primarily, so you know, and what it says as kind of, what I always like to tell you is the old Spike Lee analogy, just do the right thing. Right prudent decisions being made? Well, the funny thing is, after the amount of time I spent in this space, the amount of prudent decisions that are made are not as a higher percentage, if we like to think that they are right and then. So that’s kind of and it’s and again, it’s a very complex thing. And as I told you when we were warming up here a little bit, this is a three month masterclass, probably, if you had it, if you really wanted to get into the intricacies of this, and then all of the interpretations and the lovely system that we have. But you know, you know the it just gets overlooked because we get into that, we’ll get to it. We’ll get to it. There’s cost fatigue. Our biggest problem with benefits is cost fatigue. I i gonna, I’m gonna tag my good friend Gary Bender, who I met at a met a few times. He’s a CFO. He talks to CFOs. He he spoke at a meeting I was at in August last year, and he says, we don’t understand it. We understand every other item on our p l, on our balance sheet, all of the financials, when we go into the board meeting, we understand every other one of those numbers. We still don’t understand the health benefit number. We don’t now, Gary does, but a lot of but his brethren don’t. Oh yes. And if we’re a CFO and we can’t explain it, there’s a there’s like, does not compute, right? And ultimately what happens is, then they, he, it’s really funny. Then goes, No, we just blame it on HR, you know? So it’s, it’s, hopefully I did Gary justice by that. But ultimately, what’s happened now, why is this becoming it’s out there. There those risks haven’t changed, especially if you were in a self funded health plan, especially as you were out there, those risks haven’t changed. When the 401 k there were a lot of lawsuits by employees to their employers on 401 K’s, it changed how we structured those plans. Not a 401 K expert, either. Not a JD, not a CPA, not a 401 K expert, but ultimately, the trail fees, I mean, there were companies getting sued for a half a percent of a trail fee on a mutual fund and how that wasn’t violating, it was violating that prudent status, right? Well, when I looked at that, and I looked at what was happens in health benefits, and thanks to I’ll, I’ll reach out to him, because I think he’s, he’s retired, first of all, but he taught me a lot of these things. Gentleman by the name of Frank panacea, who taught me about this stuff. And I’m like, wow, this is amazingly interesting. Because how many things get screwed up in a health plan a week? Yeah, right. How many times? How many? How 20 calls of a book of business, of clients, right? That we have 2030 calls a week or something didn’t go right, right? How many times that’s way different than half a point on a mutual fund. So, yeah, so, so it was out there, right? And it hasn’t been touched. But now with, there’s a blue there were two lawsuits that were there, and there’s a third coming with Blue Cross, Blue Shield of Minnesota. That’s actually a government lawsuit Department of Labor is after the Blue Cross, Blue Shield of Minnesota. And then there’s the one that’s kind of been the dominant one, which is a Johnson and Johnson lawsuit about drug prices. And want to talk irony of all irony, right? Pharmaceutical manufacturer and a drug company is their health plan, their employees are suing them because of drug pricing and their health plan. So that’s now, whoa. We’re kind of, as I’ve told people around this. I’m glad I started studying this. You know? I. 10 years ago, because we would always talk about it. We put measures into place to address it, but we used to say it’s not that big of a threat. Well, if you do these things right, and we’re I will tell you we read contracts. We read a lot of contracts, but there is a contract or two that’s probably has not been reviewed at the level it needs to be. So everybody in our world is going to have to take this game up to be able to get out ahead of this, to avoid litigation and avoid government spending time, because nobody wants any of that in their business. Plus, you know, the people you’re working with, they’re looking to grow, yeah, and, and whether they’re in, you know, you’re so great about it is exit your way. It’s not about exit your way to sell it or whatever. It’s to give you the option, as many options and choices as you possibly can to exit. Well, guess what? Government finds a litigation really screw that process up, don’t they? Damon, yeah,

pretty much opposite.

Chris Lokken 30:58
So that’s kind of the that’s kind of the big why, right? So you know and why we’re talking about this now, we think people need to learn more about I will tell you, it’s still a moving target. There’s a lot of people trying to figure out what this means, but there’s another lawsuit that came out against another insurance company that’s acting as a third party administrator. And, you know, Mayo Clinic is now has some issues with their employees. So, yeah, it’s interesting. So

Damon Pistulka 31:26
let me, let me summarize it into my my mind, so I can understand it. You get to live in this world. I don’t. And I want to get it simplified down to Damon terms. I’ve got a company, I think that I’ve selected a healthcare plan. Could be we customize this thing. Whatever we did, we got a healthcare plan now, and my I am responsible for the decisions that that healthcare company is making in regards to some of the plan details, is that what we’re saying, yeah,

Chris Lokken 32:05
what I would say is, you’re signing a contract. Yeah, you’re signing a contract of 120 pages of language you don’t understand. Yeah, a lot of times we’ve reviewed enough of those contracts to know where the weasel words and the bad languages will advise you of that. But in the end, like in it, especially in in any of these arrangements, there’s different percentages, there’s hit there’s numbers in there where there’s revenue streams going in every direction, right? You know? So you sign that contract, you go, this is pretty standard document. Damon, here you go. Great, Chris. We’re really excited about this new plan, right? Great. You sign it. You’re great. But what you’ve done is, as a fiduciary, under the rules of ERISA, you have not necessarily fulfilled your prudent the definition of prudence there, because you don’t. You may. You’ve basically said, Yes, I’m going to do this, but you might not even know how it works.

Damon Pistulka 33:04
So basically, we need to understand our plans a lot better and have people alongside of us that understand them better.

Chris Lokken 33:10
Therein lies the message. And it depends, right? If you go your risk is limited a little bit more if you’re in a fully insured plan, when you do when you basically say, Here, Blue Cross, Blue Shield. Here’s the keys, yeah. Do this, do this, do this. You’re still under those rules of risk, but there are things that they take and consider at least right now, yeah, not a JD, not a CPA, they take those things and they take some of that liability off your plate, because you have, you have, you have transferred all the risk to them.

So we, who the heck could you ask about this? Well, you’re doing it. I mean,

Damon Pistulka 34:00
you’re the lawyer that you help. Are there? Are there benefits lawyers that you should be doing,

Chris Lokken 34:03
that should help? There are ERISA attorneys. They’re not enough of them, yeah, which means the laws of supply and demand apply, yeah. So what I will tell you, and what we see as consultants, is that there’s a lot of stuff that goes on, I’m gonna, I’m not gonna try to get too deep into the world of that consulting and is your consultant doing the right job. But I will tell you, this is something that I know as we as a consulting firm are figuring out. What does this look like? Because we already had a laundry list of things that we needed to assist clients with. Yeah, in this transparency stuff before these lawsuits came under the consolidation Appropriations Act, we’re not going there today, but ultimately, we’re trying to figure out, how do we become better consultants, and then how do we make sure that we’ve got transparency and disclosure in contracts, right? So it really comes down to your benefit consultant saying. Okay, here’s here’s what we’ve got going on, and here’s where all the money’s going, right? That hasn’t necessarily happened in a lot of self funded health plans, a lot of even what we call level funded health plans, which are kind of a hybrid, right? It’s a great program. Here’s how it works. I sign a contract because I’m saving money over fully insured, and it’s helping my employees get better benefits. I’ve solved my problem. It’s great. Well, you you’ve assumed risk because you’ve now went from that lower level of fiduciary by transferring the risk to now you have to manage and pay attention to that as well. So that’s some of those, we have to be better at that. Yeah, so it’s really navigating around that. What we typically will do is there has to be, when I take somebody from that transfer risk space, fully insured, to a to that other space, I got to go into risk management in the other three, in the other three places, we do it, we eliminate it, we mitigate it, or prevent it, if you will, or or we transfer it right, yeah, or manage it right. That’s kind of those, those things that we’re looking at from a risk management perspective. And there are ways to then say, hey, guess what? We screwed up. You can buy policies if you want to. It’s not really designed to sell more insurance. You just need to have that backstop. Because the other thing, and I’m going quick, because I know we spent a lot of time on this, no, no, that’s the other thing. Because the other thing is, is we also have to know your corporate structure, yeah, if you’re a C Corp, you’re you have some insulation, right? Yeah, if you’re an S corp or you’re an LLC, right? And there’s some pretty darn big S corps and LLCs out there, the corporate veil does not protect you, yeah, from breaches of liability. So, Mr business owner, I understand that this is, you know, we need to talk about a few things. One is, your personal assets are at risk. Yeah? And does your wife, does your wife like the lake house, right? Yeah. Let’s talk about that. Okay, it’s, it’s having that conversation and then saying A, we’re going to make sure that we’re going to, we’re not just going to go blindly sign contracts anymore, right? Yeah, we’re going to have data to know what’s going on in our plan, where our dollars are going, and being very transparent about that, we’re going to then look at it and then make sure that we, if we need to make changes, we’re going to make changes, because things do change, and things move on the fly, yeah, and then at the end of the day, we’re probably going to put some form of fiduciary liability policy in the back end. That’s

Damon Pistulka 37:48
what I was going to ask. Because, I mean, you know, lot of the companies that I deal with, we usually have that directors and officers liability protection is just something that we always do, because you never know what’s going to happen, and even with the best decisions, right, it still doesn’t work well,

Chris Lokken 38:07
you would be shocked. And now I actually can recently do to some things that we do differently in our organization. I have my property and casualty license, even though I So, I can actually say this with like legal certainty. They’re shocked the amount of people who are on the on that side that sell you the DNO policy, right? That goal, hmm, boy, you know that’s like three grand. You know what? We get this deal if the three grand is not there. So they, yeah, they don’t need that, right? Even inside of firms, insurance firms, there’s an argument whether or not you really need it or not, because we’re not a we’re not really good at talking about the risks. Yeah, we’re not really good at saying, Hey, here’s the deal, right? And sometimes, if that gets you, if that gets you kicked out of a client relationship. Yeah, you know, there’s probably 10 other people that’ll form a line outside your door, right? And, you know, and there’s, there’s other things in this, this farm, there’s things that we come in and say, Hey, we had, I will say this is not something we are good at. At Christians. We don’t like it, are very transparent about things. There are bigger companies, bigger organizations, that are always trying to save people the dollars. So we’re going to put you in a pharmacy coalition. It’s just going to have our name at the front of it. Well, that may be a revenue source for your consulting firm that they don’t have to disclose. So there’s this. This is a network of things that has kind of been built upon people kind of just going back to knowledge is low, fear is high, right? I don’t want to sound stupid because I am the CFO. I don’t want to ask what’s going on, yeah, correct, right? Because, you know, we’ll get through it if we need to. Right? Well, unfortunately, that. That that environment for that to be okay is is changing a little bit. You know, there’s more cops trying to catch a speed and doing that right? Yeah,

Damon Pistulka 40:10
yeah. Well, it sure is interesting to to know that, you know, in these self insured plans, where we’re putting these things together, trying to do the right thing by saving money for our people, for our company, and provide better health care, that we also need to make sure we know where the money’s going, how you know how all the money’s being spent. And then, even if we know that it seems like, if we’re in the situation where we have that kind of health care coverage, we seriously need to look at some other sort of coverage to make sure that, just in case, because, you know, I mean, it’s nothing, it’s really nothing anymore, to spend a million dollars In health care a year company, no easy,

Chris Lokken 41:02
easy. And if, and if I can deliver you, as any of the people, you work with them, and if I could deliver them a solution that cut that by 25% they’d be and I it’s possible, right? They’d all be running to do it. The problem is, is, let’s make sure we know how we’re getting there, right? Yeah. And are we doing things that are in the best interests of our employees, and what is our process moving forward to evaluate and have that process in place. But, yeah, it’s there. So,

Damon Pistulka 41:30
awesome. Awesome. You just made a very complex thing a lot easier to understand. You know, basically, because what you’re saying is when, when we’re spending a lot of money in healthcare with companies, we’re trying, like I said, do the best thing. We really need to know where that money’s all moving inside that money we’re spending, because if we’re not spending in the way that our employees feel is good and appropriate and in the best interest of all of us, then we can be liable for that correct.

Chris Lokken 42:07
And if you want to throw into that Blue Cross, Blue Shield of Minnesota case, the Department of Labor could think that you’re not doing that. Oh, and again, I’m not trying to. I don’t want to get this to be a downer, because it’s a beautiful it’s, we’re in the spring. It’s the time of happy renewal, right? Yeah, you know, and I will say that nothing against anybody who works for the Department of Labor, right? No, but they don’t. They don’t, they don’t quite understand all the construct of this, because every government employees on the the the government employee health plan. When you try to talk about some of these things with whether people are in the, you know, the executive branch, or even in the legislative branch, they don’t get it, because they all, they all go to their book on November 15 and pick their plan out of it, yeah, which is fine. I have no problem with that. That’s yeah, federal government pays for health care, but they don’t think about some of these things. So your your Hill, your your Hill, and the rock you’re pushing up to get them to see it your way gets a lot steeper, and the rock gets a lot heavier, right? So that one, and again, I’m not trying to scare people, no, no, you know, but that is something that’s out there, and it’s,

Damon Pistulka 43:19
it’s like anything. You know, how many, how many you go back 1015, 20 years in business? How many regulations are here now that weren’t then, that are regulations that if you don’t follow, you can be out of business? I mean, it’s just another one of them, and that’s sneaking to the forefront of of all we can do as our businesses get bigger

Chris Lokken 43:39
and as as I’ve talked with different experts on this, I won’t quote them all, but thank you to all those people they’ve you know this is becoming. It’s kind of like becoming, I looked at it kind of like OSHA, right? If you have a really run a really clean shop, and OSHA comes in and you got a couple of things, and they said they were going to be there two and a half days, and they leave after lunch the first day. Okay, that’s your goal, yeah, whether that’s and, by the way, if that’s OSHA, that’s, uh, any private attorney looking to get some get get a class action lawsuit, whatever the heck that might be, anything that’s going to disrupt your day from doing what the heck you really want to do as a business owner, right? When they come in and they find nothing under the tent, right that they that, that really gives them the red flag to go, we need to look for 10 other things under the tent. You’re in good shape. And I will tell you if you’re freaking out about that, because this is freak out kind of stuff, it can be that’s where beginning. You know, it’s one of those things where the journey begins by just saying, Okay, step forward. Let’s learn. Let’s figure this out. And you know that starts with data that start then starts with contracts. You want to know the data first, because the data. Tell you what the contract’s doing, and then start working at backwards to then get you into an evaluation process, and then get things moving forward. So and it, by the way, if you’re showing steps to

get to this, you’re ahead

Chris Lokken 45:13
of many, many other people, if that makes sense, because there’s still, you know, the average life of a CFO right now is three years, right? So the you may just be the new guy, yeah, you may be,

hey, guess what? I’m

Chris Lokken 45:29
I’m leaving in six months, and you’ve got about, yeah, a year to get anything done, right? So you may, you may be at varying states, companies may be in that space, and over time. I don’t think it’s going to be complicated, but it’s really getting to know what you’re doing, just like you would do if you were buying, you’re buying tool steel, right? You’re you know way more about tool steel. If you’re a you need that raw material, then you probably know about your health plan. Yeah,

good stuff,

Damon Pistulka 46:01
that’s for sure. Well, Chris, thanks so much for stopping by day, because this is really helpful. I mean, it’s, it’s when you think about this, as business owners, they just don’t realize some of these risks that will come out of the blue and really come to bite them, but helping us understand it better today. And and also to the the stuff that you’re helping to understand on, on these, these healthcare plans, where we can put them together that actually the examples you gave of being able to get better coverage, better drug care, or whatever it is, by really looking at these is, is quite interesting. So thanks for being here today. Man,

Chris Lokken 46:39
oh, thanks for having me, it’s always fun. So, yeah, yeah. Well, if, if

Damon Pistulka 46:43
you were listening to this and you weren’t got in late, go back to the beginning and listen to this, because Chris was talking about a lot of interesting things that can really help you put together better healthcare plans for your companies. And then, of course, as we were in the end here, talking about the benefit fiduciary liability that business owners have, that they may not even know they have. So thanks everyone for being here today. I want to say, Julian, thanks for doing for stopping dry and dropping a comment in here today. But I want to thank all the other listeners that come and listen to us every week. Thank you so much. We’ll be back again later. Chris, thanks for being here today. We’ll finish up offline. All

Chris Lokken 47:29
right, thanks. Damon.

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