Frier Levitt co-founding partner Jonathan Levitt is quoted in a Bloomberg Law article, “Health Plan Cost Control Suits Ramp Up as Pricing Data Revealed” by Lauren Clason. The article highlights that lawsuits are increasing against employers and health insurers for not managing health plan costs effectively, spurred by recent transparency laws revealing healthcare pricing. These suits argue violations of fiduciary duties under ERISA. For instance, a Johnson & Johnson employee sued for overpaying a pharmacy benefit manager for generic specialty drugs available at lower cost elsewhere. Other companies like Kraft Heinz, Mayo Clinic, and Aetna are also facing medical-cost fiduciary litigation.
Recent moves by federal lawmakers and regulators have placed the responsibilities of employers and health plans under scrutiny as more data on healthcare pricing comes to light. The 2021 Consolidated Appropriations Act, which mandates disclosure of drug costs and “reasonable” compensation for service providers, has fueled these lawsuits. Federal court rulings and the specifics of health versus retirement plans will influence future cases.
Employers are also suing third parties that administer their claims, to access cost data and combat mismanagement claims. Failing to pursue the cost data from insurance companies and other service providers can amount to a breach of fiduciary duty for employers, said Jonathan Levitt. Employers thus far have encountered hurdles in arbitration and legal disputes with insurance companies that administer self-funded plans, according to Levitt. who represents employers. He noted, “Those employers that are suing to find out data, they’re not being overly aggressive. I think they’re setting a new standard.”
Employer contracts typically don’t cover the insurance company’s contract with other service providers like PBMs, which manage prescription drug benefits, or drug rebate aggregators—which negotiate rebates from drug manufacturers for multiple PBMs—he said. However, challenges arise from contract terms, as Levitt explains, “You don’t have a contract with these other parties, the rebate aggregator and the PBM, and therefore you can’t sue them. You can’t get discovery from them.”
Building transparency and audit language into contracts can facilitate access to data as well as explicitly deeming the insurer a fiduciary in specific activities, Levitt said.
To read the article, visit: https://news.bloomberglaw.com/us-law-week/health-plan-cost-control-suits-ramp-up-as-pricing-data-revealed
