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Impact of the recent J&J lawsuit. Does your business need to CYA?

Impact of the recent J & J lawsuit – Does your business need to CYA!

March 7, 2024

In early February 2024, pharmaceutical giant Johnson & Johnson (J&J) and its benefit plan committee were sued in a putative class action alleging the company breached its fiduciary duty in its selection of its pharmacy benefit manager (PBM), its reliance on a biased consultant in the selection process, as well as failure to negotiate more participant-friendly contract terms in implementing the services. To understand the basis of the lawsuit and more importantly how it potentially could impact your business, it’s important to recount some relevant developments over the last few years:

Decades of Retirement Plan Litigation

Beginning back in 2006, and then continuing to the present time, 401(k) and 403(b) plans have been the subject of assumed class action lawsuits alleging excessive fees. These lawsuits have focused on the employer/plan sponsor’s fiduciary responsibilities with respect to vendor selection, fees and investment performance. Several of these cases have even made it all the way to the US Supreme Court.

Consolidated Appropriations Act,  2021 (CAA) – the New Health & Welfare Plan Transparency Law

During the later part of 2020, Congress passed the CAA, which introduced a series of reporting and disclosure measures intended to bring greater increased transparency to the medical and prescription drug industry. The CAA specifically required health plans to:

  • a. post machine-readable files reporting the rates paid to network and non-network providers for a series of services
  • b. create price estimator tools that allow participants to determine in advance how much a healthcare supply or service will cost
  • c. document the processes used to create limits on access to mental health/substance use disorder services, and
  • d. solicit fee disclosures from healthcare brokers and consultants involved in the plan design upon entering into a contract as well as when renewing a contract.

The CAA also prohibited health plans from entering into contracts with network administrators that would restrict access to price or quality of care information. This is just an initial summary, as according to the Senate Historical Office, The CAA, 2021 (H.R. 133), at 5,593 pages, is one of the longest bills ever passed by Congress.

Why should you care and what does it have to do with your business? We will get to that but if you want to, skip ahead to page 1,576 of the bill where there are provisions in the CAA relating to healthcare, specifically in DIVISION BB-PRIVATE HEALTH INSURANCE AND PUBLIC HEALTH PROVISIONS that affect employers. Here it outlines the established protections for consumers related to surprise billing and transparency in health care and points now to the more visible & ever present obligations addressing employer’s fiduciary duties toward their employer-sponsored health plans.

But like a lot of employers, you may have, for the mere sake of sanity, chose to ignore the news over the last several years regarding this ruling and its subsequent updates. However, it may be time to heed the old adage, “pay now or pay later”, as it is starting to apply to compliance when your business is offering a group health plan.

Shifting Focus to Welfare Plan Fee Litigation

Recently, a number of welfare plans brought suits against their sponsoring employer, insurer, and/or third party administrators (TPAs). These suits alleged that the employer and/or TPAs refused to provide requested information relating to pricing, inflated costs and held conflicts of interest. At the same time, several well known ERISA plaintiffs’ attorneys have indicated they intend to potentially shift focus to health & welfare plan fee litigation. In addition, recently in the later part of 2023, a number of companies also began receiving ERISA document requests seeking six years’ worth of plan documents as well as a link to the plan’s healthcare price estimator tool.

As noted previously, J&J, its fiduciary committee, and individual committee members were sued for an alleged breach of fiduciary duty with respect to their ERISA-governed prescription drug benefit program. This lawsuit, along with other pending litigation, does provide insight into potential existing theories as to how other plans may be targeted in this new wave of fiduciary litigation involving health & welfare plans. Therefore, companies & their C-Suite executives should be checking at least a few boxes now to ensure that they are making a good faith effort as the fiduciary of their health plan to remain compliant.

Conclusion – Some Clarity

First, it is important to note that the J&J lawsuit contains a number of unsubstantiated allegations. Regardless, the mere introduction of these large scale allegations, combined with the CAA’s increased focus on the employer’s fiduciary duties towards their health plan & the continued delivery of unsustainable health premium increases year over year, are all now serving as important catalysts for many C-Suite executives.

These motivated C-Suite executives, who ruthlessly manage every other cost in their company, have become frustrated with not being able to reign in these healthcare costs now representing their number two or number three line item on their P&L. It is these same savvy C-Suite executives who have started to engage in a conversation where they are able to take back control of their healthcare budgets to reclaim trapped profits while actually creating healthier, happier employees that are more fulfilled and more productive.

For more understanding

We have the privilege of helping employers understand their employee benefits, and primarily their health plan, as a supply chain issue that can dramatically improve both the health of employees and the bottom line. This approach may not be new, but a reminder is needed that a viable, measurable and fiscally manageable health plan involves diligence in its healthcare supply chain management. This model allows companies to apply the same effective cost-control practices they leverage in other parts of their organization to their healthcare costs. The process eliminates wasted expenses, redirects dollars to produce measurable ROI, and optimizes the employee healthcare experience resulting in a more loyal, productive, and profitable workforce.

For a copy of an overview of important cost containment solutions you can start to positively leverage in this process, click here:

The CEO Survival Guide – How to Make Healthcare A Controllable Cost

If you have any questions on taking back control of your healthcare spend or other benefits-related challenges, please contact us at 714.716.4060 or mike@my-EBP.com, or provide info here .

2022 Employee Benefits Market Outlook Executive Summary

2022 Employee Benefits Market Outlook Executive Summary

March 11, 2022

The challenges of the past few years have been unprecedented, and they have changed the way that employees think about the workplace, benefits, and their careers. Employers are still facing an uncertain future due to the COVID-19 pandemic, rising healthcare costs, and the “Great Resignation”, with no end in sight.

Understanding these challenges is essential for keeping your business prepared and profitable. Read on to learn more about what factors influenced the employee benefits market in 2021, and what you can expect in 2022.

Please note: This is a high-level executive summary. A full copy of the report is available by clicking here: 2022 Employee Benefits Market Outlook .

The Challenges of 2021 Remain

It’s impossible to look forward to the future without understanding the past. In many ways, the unique, but interconnected, trends of 2021 will help you as a business owner make sense of the current state of affairs as each of these influences will have a major impact on the trends expected throughout 2022.

The COVID-19 Pandemic:

As we saw in 2020, the pandemic remained the most significant market disruption in 2021. The pandemic never considerably improved in 2021, and while vaccination rates are increasing and return to work is beginning in some areas but with a changed focus, COVID-19 cases continued to trend upwards, and the economic uncertainty caused by the pandemic continues.

Labor Shortage:

In early 2021, economists predicted returning to the workforce in droves – but that never happened. Instead, at the end of 2021 there were still over 6 million unemployed Americans, and countless job opening that hadn’t been filled. It was all due to a fundamental change in how workers viewed their labor and the value of employee benefits, especially in the service sector. Employees are holding out for better jobs and more meaningful benefits – and that’s what you as an employer need to grapple with in 2022.

Rising Health Care Costs:

For over a decade, employers have experienced steadily increasing health care costs. While some choose to defer nonemergency health care during the pandemic, 2021 saw individuals return to their normal health care routines, increasing the utilization of care and a resulting cost increase. Once again, you, as an employer, faced with major cost increases, were forced to reconcile limited budgets with employees demanding more value than ever from their benefit offerings.

Looking Forward to 2022

COVID-19 Isn’t Going Anywhere:

The COVID-19 pandemic is showing no signs of slowing down in 2022. The ripple effects of the pandemic will continue to be a catalyst for many of the workplace trends we expect to see in 2022.

Give Employees the Flexibility They Want & Need:

Thanks to the shift in workplace norms employers experienced during the pandemic, the one-size-fits-all model that many employers have used for employees just isn’t going to cut it anymore. Employees want more from their jobs – and they’re willing to change jobs to find it. According to a SHRM (Society of Human Resource Management) survey, 36% of employees are willing to change jobs for better benefits.

If employers want to attract, hire, and retain the employees that are invested in helping their company grow, they need to meet their employees in the middle. And that means offering a workplace and benefits package that is holistic, flexible, and can meet the needs of each individual employee. Employees want jobs and benefits that will have a meaningful impact on their quality of life, and means employers need to think beyond the basic benefit offerings that they have provided in the past. In addition to basic benefits, employees are looking for expanded PTO, flexible leave options, remote & hybrid work options, expanded mental health services, student loan relief and virtual open enrollment and easily accessible & simplified benefit education to name a few.

Protect the Bottom Line:

While keeping employees happy is going to be key in 2022, employers still have to consider how they can protect their bottom line while health care costs continue to rise.

One option to consider is switching to an alternative health plan model, such as individual coverage health reimbursement arrangements, reference-based pricing or level-funding. All these options have been available for some time but they have been successfully scaled so that they are available now to a greater number of employers, especially those with under 250 employees.

At the same time, keeping employees educated on how to make the smartest health care decisions can also have a large impact. By ensuring that employees understand how their health plans and prescription coverages work, employees will make smarter usage decisions, which will lead to lower costs for both you, the employer, and your employees. After all, it’s in everyone’s best interest to work together.

Ready to learn more?

2022 will be a year full of challenges, thanks in large part to the pandemic and its wide-reaching consequences. It will also be a year of opportunity. After nearly two years of a pandemic, it may be tempting for employers to sit on their hands and wait for a return to normalcy. But successful organizations will be those that prepare for and embrace the new normal.

In 2022, employers will need to think creatively about how they can accommodate employee desires while also controlling costs and ensuring worker safety from COVID-19. While this may seem daunting, organizations that rise to the occasion will be well positioned for future growth and stability.

Reach out to Mike Young at MY-Employee Benefits to discuss these trends in more detail and request additional resources on these and other important workplace topics that will position you as an employer of choice in this new environment. He can be reached at 714.716.4060 or mike@my-EBP.com .