Courts and federal agencies often refer to the PD/SPD when examining whether a plan sponsor has fulfilled their fiduciary duties. If a PD/SPD has too many amendments or outdated language it can result in regulatory penalties, plan participant confusion . . . and ultimately litigation.

A plan sponsor is required to review and update their PD/SPD to ensure it reflects evolving regulations, new vendor programs, and trending benefit issues. For example, as new drugs gain Federal Drug Administration (FDA) approval, it will be critical for the plan sponsor to understand how (or whether) such drugs will be covered under the terms of the existing plan. Generally, ambiguity in the PD/SPD will be construed in favor of the plan participant. The laws are constantly changing, and an annual review of the PD/SPD will help identify areas where language should be adjusted to account for gaps and unexpected plan exposure.

Leveraging artificial intelligence

Artificial intelligence (AI) refers to technology that enables computers to perform tasks that typically require human intelligence. In the health care space, AI can analyze substantial amounts of data, process claims data and pricing trends, and even draft plan documents. Self-funded plan sponsors are increasingly leveraging AI to optimize the overall efficiency of their health plan operations.

AI regulations remain influx, with no unified framework and inconsistent rules across agencies and states. Political shifts further complicate enforcement. Courts are struggling to keep up with AI’s rapid evolution as well, and complying with existing laws like HIPAA may present an additional challenge. AI has created new and exciting opportunities in the health care space, but it is important to recognize where utilizing AI alone could present problems. When it comes to analyzing complex claims, understanding and interpreting the evolving regulations, and building trust, human judgment and empathy are still essential.

For example, in a recent case, Kisting-Leung v. Cigna Corp., 2025 WL 958389 (E.D. Cal. 2025), plan members filed a proposed class action alleging automated algorithms were used to improperly deny medical coverage and reimbursements and alleging fiduciary breaches by the claims administrator. The court dismissed the wrongful denial claims but allowed them to amend and refile. The court allowed certain fiduciary breach claims, finding that reliance on an algorithm may violate plan terms and create an abuse of discretion.

This illustrates that to avoid costly litigation, a plan sponsor’s use of AI must align with regulations to ensure data accuracy and transparency and uphold ethics as well as their fiduciary duties. Furthermore, plan sponsors should document AI use, audit responses received from AI, train staff on both company and AI boundaries, require vendor compliance, stay updated on pertinent law and most importantly – ensure there is human intervention when necessary.

Stop-loss insurance and level funding arrangements

In general, stop-loss insurance protects self-funded employers by reimbursing them for claims that exceed a set threshold, limiting their financial risk and helping to maintain stability. Understanding stop-loss is critical because it directly impacts the plan sponsor. Without a clear grasp of the policy’s coverage terms, exclusions, advance funding availability, or reimbursement processes, plan sponsors may face unanticipated liabilities and gaps in coverage that could undermine the sustainability of their respective health plans.

Related: Self-funded plans grow as fully insured plans shrink

Plan sponsors who adopt a level-funded plan also need to understand the nuances of this arrangement. A level-funded plan may offer less flexibility in plan design and higher financial risks. For example, a high claim year could lead to a large increase at renewal, which erases predictability.

Navigating stop-loss and level funding can be confusing. Plan sponsors must have an in-depth understanding of the complex policy provisions, coverage limitations, and exclusions. The plan sponsor must review these policy provisions, understand how they relate to the underlying PD/SPD, and proactively monitor the plan’s performance. Plan sponsors have a fiduciary duty to select, monitor and provide oversight of plan vendors. Failing to understand the plan’s stop-loss coverage or level-funded status will create coverage gaps and financial problems.

Emerging therapies and parity compliance

Lastly, for self-funded employers, both the Mental Health Parity and Addiction Equity Act (MHPAEA) and the emergence of cell and gene therapy (CGT) highlight the growing need to understand and manage the financial and compliance implications of advancing therapies. The MHPAEA requires that self-funded employers offer mental health and substance use disorder (MH/SUD) benefits that are no more restrictive than medical/surgical (M/S) benefits, while CGT represents a rapidly emerging category of high-cost, innovative medical treatments.

As plans begin covering multimillion-dollar CGTs for physical conditions, MHPAEA must be considered as this statute prohibits placing more stringent limitations, like visit limits or higher cost-sharing, on comparable mental health treatments. Employers must proactively assess how they structure coverage, apply medical management mechanisms, and align cost containment strategies across benefit categories to ensure both financial sustainability and regulatory compliance in an evolving treatment landscape.

Plan sponsors can ensure MHPAEA compliance by conducting Non-Quantitative Treatment Limitation (NQTL) parity analysis testing, aligning medical management processes for MH/SUD and cell and gene therapy considerations, and ensuring the plan design matches the intentions (and operations) of the plan sponsor. These actions are critical to address the high costs associated with these treatments as well as ensuring compliance and meeting the needs of the plan members.

In 2025 we are facing evolving regulatory requirements in a new presidential administration, which requires paying close attention to plan design and compliance. To satisfy their fiduciary obligations, self-funded plan sponsors must take a proactive, informed approach to health plan design and management. This means having a complete understanding of their responsibilities under ERISA, maintaining a current and compliant plan document, and ensuring it is regularly reviewed. As AI tools continue to be leveraged in claims and benefits administration, plan sponsors must use them responsibly, ensuring proper oversight and transparency. A solid grasp of stop-loss coverage is essential to managing financial risk, while staying ahead of emerging treatments like cell and gene therapy requires aligning coverage strategies with MHPAEA standards. Together, these actions support compliant, sustainable, and effective self-funded health benefit programs.