Plan Assets Demand A Fiduciary Mindset As AI Expands The Reach Of Recovery Operations

AI and automation are helping health plan recovery operations scale further than ever, surfacing recoverable plan assets that would otherwise stay lost. The discipline required to scale alongside them is harder to see and equally important: every decision still needs a defensible record that can stand up to a fiduciary audit or litigation. It's a tension that health and benefits leaders are only beginning to confront, and the plans pulling ahead are the ones treating documentation discipline as a core operating requirement rather than another piece of paperwork or a service obtained via contract.

Helping industry players stay on the right side of the law is attorney Nancy Case. She's the Founder of Case Health Benefits Legal Advisors, where she advises self-funded plans, third-party administrators, payment integrity organizations, and recovery stakeholders on ERISA and Medicare Advantage recovery and subrogation, and recovery litigation. She acknowledges that identifying more recoverable dollars is a clear win for plans and their partners, but cautions that scaling the volume of recovery activity without also scaling the processes to support those efforts creates exposure and requires a like or concurrent scaling to avoid creating added fiduciary exposure.

"The issue is whether the authority, documentation, communication, dispute and resolution process scale alongside the recovery model. That needs to happen," she asserts. The execution side is where she says most recovery operations break down, and AI is amplifying both the wins and the gaps.

As recovery scales, so must documentation

Case is direct that the question is not whether recovery operations should expand. Missed recovery means plan assets are left unrecovered, and those assets belong to the plan in service of the plan members and beneficiaries. "Claims are your currency," she notes. When recovery activity outpaces documentation discipline, however, that's when recovery wins can quickly become liabilities. "If the file can't explain who had the authority, what was verified, what was disputed, and why a recovery decision was made, then that scale becomes part of the risk."

The same principle applies regardless of where the work sits. For self-funded plans, recovery implicates fiduciary process because the money belongs to the plan. For TPAs and payment integrity vendors, the parallel issue is delegated authority and defensible execution, which means showing the vendor acted within scope, followed plan terms and contract requirements, honored client instructions, and preserved a clear record. The audience for that record is increasingly the Department of Labor, CMS, and the plaintiffs' bar.

AI at the top, humans at the decision point

The natural place Case sees for AI application in recovery operations is identification, where pattern matching across claims data, police reports, and carrier information can surface recoverable cases that human staff might miss. She views that application as genuinely valuable, but with a clear limit. "You've got AI at the top end identifying all of the opportunity, but I still think you need humans at the bottom end, because they're the ones exercising the discretionary authority or asserting statutory right of recovery in the case of Medicare Advantage. AI is not quite there."

The reason has to do with the structural variability of injured-person cases. Every claim involves a unique fact pattern, and the recovery decisions that flow from those facts require human judgment about plan language, stakeholder equity, and the specific situation. "Lightning doesn't strike twice. No car accident is exactly the same," she says. "Plan fiduciaries and downstream vendors have to look at every single fact and then produce a defensible record." Case's own testing reinforces this limitation. Working through hypotheticals in her own AI environment, she finds the technology gets recovery scenarios wrong frequently enough that she would not delegate discretionary decisions to it.

The operational record is harder to build than it looks

The documentation discipline Case calls for is genuinely hard to maintain across fragmented systems. A subrogation specialist may handle 2,500 cases at once, working across case management software, email, vendor notes, and plan documents that update on different cycles and are stored in different environments. "To get all of that converging together to create one record is very difficult to do," she explains. "There isn't a great solution out there right now that captures all of it. The legal knowledge and the technology have not quite met."

The fix is partly contractual and partly operational. On the contract side, Case is pointed about what self-funded plans should look for when evaluating vendor recovery arrangements. The first item is the plan document itself, which the plan is usually required to keep current with the TPA. The second is the language around fiduciary authority. "If a third-party administrator is telling you that it has sole authority to decide whether to pursue a case, to litigate a case, or waive a claim, that should be a red flag for a health plan. The plan shouldn't give that away. There needs to be a mechanism to have a conversation about it." The fiduciary duty to monitor delegated activity sits with the plan, which means audit rights, reporting cadence, and named points of contact have to be in the contract from the start. Many of those contracts are now getting a closer look as broader transparency pressure on health plans intensifies.

"No member abrasion" works at the top, not at the bottom

The recovery industry's current operating ideal of "no member abrasion" is one Case supports at the identification layer. AI that can pull police reports, identify responsible parties, and locate carrier information removes friction from the early stages of a recovery case. The bottom of the funnel still requires direct communication. "If the injured persons hires an attorney, get with that attorney right away and make sure they have a copy of the plan document. Explain their responsibilities and their client’s reimbursement obligations. If they're educated early, you're less likely to have them explaining to their client at the end when there is a settlement that, 'Oh, by the way, your health plan is going to take half of it.'"

The same posture extends to working with attorneys on claims itemization review, mediation participation, and reviewing whether claims are related to the underlying injury. The communication is cooperative by design, because cooperative communication produces better outcomes than adversarial ones.

Plan assets demand a different mindset

Case's closing point is about how recovery work is framed inside the operation, from the CEO down to the claims department. "The fiduciary aspect needs to be top of mind," she advises. "This isn't an insurance company's money. These are plan assets held for participants, and that's a different animal. Any recovery specialist should bear in mind that the claims they're handling are plan assets, and they need to document decisions and actions around that appropriately." The same mindset must extend to brokers, TPAs, and the plans themselves, who Case sees as three layers of fiduciary influence that have to align on the importance of clean records.

The technology, she says, will eventually catch up to the legal complexity. In the meantime, the discipline has to come from the people running the recovery operation, with AI assisting at the points where it actually adds leverage and human judgment holding the line at every decision that produces a recoverable dollar. "Each recovery specialist should appreciate their role as an influencer of fiduciary decision-making," Case says. "Maintaining a clear record is paramount. It is not casual. It's important work at every level."