Indiana Enacts Fiduciary Duty Law to Reduce Health Insurance Costs

Indiana Senate Enrolled Act 3 (SEA 3), effective July 1, 2025, mandates fiduciary responsibility for third-party administrators (TPAs), pharmacy benefit managers (PBMs), employee benefit consultants, and health insurance agents or brokers compensated on a percentage basis when representing health plan sponsors. This legal requirement aligns these entities with similar fiduciary standards found in financial advising and pension administration, requiring them to act prudently and solely in the best interest of their clients. The legislation aims to address one of the most pressing challenges in the state: high health care costs that impact employers and consumers alike.

By imposing fiduciary duties, SEA 3 seeks to eliminate financial conflicts of interest that may otherwise incentivize decisions driving up health insurance costs. The law's sponsors anticipate that this measure will foster cost reductions and build stronger trust relationships between health insurance companies and employer groups purchasing coverage. This move reflects a broader trend in insurance regulatory frameworks to enhance transparency and accountability within the payer/provider ecosystem.

Senator Chris Garten, the bill's author, emphasized the law’s role in creating long-term savings for Indiana businesses and families. He framed the legislation as a pivotal effort to lower health insurance expenses, allowing employers to reinvest savings into their operations and enabling employees to retain more of their income. This focus on fiduciary responsibility supports compliance and ethical standards in the industry amid growing scrutiny over drug pricing and administrative fees.

The new legal framework for TPAs, PBMs, and brokers is expected to influence market dynamics by encouraging more prudent financial management and oversight. As these intermediaries are often critical in negotiating and managing health benefits, their alignment with fiduciary standards could contribute to enhanced cost containment strategies and more efficient plan administration.

This legislation positions Indiana as a state proactively addressing health insurance cost drivers through regulatory reform. It reflects ongoing efforts to modernize health insurance practices, reinforcing fiduciary duties as a foundational principle for all parties involved in employee-sponsored health plans. Stakeholders in the insurance sector should monitor the implementation and impact of these fiduciary mandates on plan design, cost structures, and employer-provider relationships.