Shakespeare’s Hamlet uttered “to be or not to be, that is the question”. Well, large employer groups face a new question, “to sue or not to sue”. Perhaps a little dramatic, but in the rapidly evolving landscape of healthcare and drug supply chain, employers are confronted with the difficult choice of taking no action and facing their employees’ “slings and arrows”, or taking legal action under the Consolidated Appropriations Act (“CAA”). This article explores the choices.
Massive changes in the law are impacting stakeholders in the healthcare and drug supply chain. Change is good for some, bad for others. This diverse group of stakeholders includes drug manufacturers, medical providers, pharmacies, insurance companies, brokers, Pharmacy Benefit Managers (“PBMs”), large employers (“plan sponsors”) and their employees. Among these stakeholders, plan sponsors are stepping up to safeguard their rights and the results could be a “win” for employers and their employees.
Plan sponsors are taking decisive action to protect their rights and fulfill their duties to employees. A significant surge of lawsuits against brokers/third party administrators (collectively, “Consultants”), insurance companies and PBMs signals a growing momentum to hold insurers accountable for mismanagement of medical and drug spending. Additionally, plan sponsors are exploring undisclosed broker fees through litigation and arbitration.
Recently, Kraft Heinz Co.’s (“Kraft”) employee benefit plan filed a lawsuit against Aetna Life Insurance Co. (“Aetna”) in Texas federal court. Kraft alleges that Aetna mismanaged Kraft’s health and dental plans by pocketing undisclosed fees and wrongfully approving millions of dollars in claims. Kraft further alleges that Aetna violated Employee Retirement Income Security Act of 1974 (“ERISA”) by improperly leveraging its role as Kraft’s third-party administrator to generate $1.3 billion in excess profits. Kraft sued after it asked for its employees’ claims data and Aetna allegedly provided incomplete data and edited bills from a specific time frame.
The CAA provides employers access to data previously beyond their grasp. Employers are becoming more aware of fees charged and claims paid, leading to increased scrutiny and legal action. Kraft v. Aetna is just one of many lawsuits expected to be filed by employers and plan sponsors against Consultants, PBMs, and insurers.
Many employers are taking a stand against the Consultants and plan administrators, demanding transparency and accountability in the management of their health plans. As legal action unfolds, it remains to be seen how these cases will shape the landscape of employer-sponsored health plans. To protect their fiduciary duties and the best interests of their employees, employers must ensure they have access to claims data and review their agreements with the Consultants, plan administrators and PBMs.
Employers that do not actively seek out and analyze this data, may be sued by employees, accusing them of breaching their fiduciary duty. In the same vein, inactive employers will be vulnerable to employee lawsuits based on a “breach of fiduciary duty” claim. Employers seeking to avoid claims can effectively close the door for employee litigation. Taking “no action” has consequences. This emerging litigation trend includes employees pursuing litigation against employers. We have seen a wave of law firms actively seeking employee/plaintiffs against their employers regarding health plans.
Whether the new laws are “a sword or a shield” will depend on the employer action.
How Frier Levitt Can Help
Frier Levitt has extensive experience representing plans and plan sponsors in negotiations, audits, litigation and arbitration with PBMs. Our firm has observed the unethical practices of PBMs and the negative impact they have on healthcare and life sciences industry stakeholders, including plan sponsors. If you are a plan sponsor facing PBM contract issues or experiencing other issues with a PBM, contact Frier Levitt to speak with an experienced member of our team. We can provide comprehensive support and legal guidance tailored to your specific needs.
