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How National CooperativeRx Helps Plan Fiduciaries Fulfill Their Obligations Under ERISA

The importance of fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) first came to light with respect to employer-sponsored retirement plans. A plan fiduciary generally must act in the best interest of the plan and the plan participants. Over time, Congress and federal regulators began to apply ERISA’s fiduciary duty rules more-stringently to health plans. This scrutiny of health plans dramatically increased with the passage of the Consolidated Appropriations Act of 2021 (CAA). The CAA adds transparency and disclosure requirements, as well as clarifies a health plan fiduciary’s responsibility to ensure reasonableness of plan costs.

While both ERISA and the CAA put this responsibility on the plan’s fiduciary, the laws allow the fiduciary to use trusted advisors to help fulfill these responsibilities. Fiduciaries are required to determine whether the fees paid to any service provider are reasonable and free of conflicts of interest.

Members of National CooperativeRx are well positioned should anyone challenge their fiduciary oversight of the pharmacy benefit plan. National CooperativeRx uses several regular ongoing processes to help demonstrate “procedural due diligence”, a key factor that courts consider in ERISA fiduciary duty cases. Secured through competitive bid, the Cooperative partners with an independent PBM consultant to negotiate our Master Contract. Strong definitions in the contract ensure rebates and other pricing discounts are received by plan sponsors. Internal benchmarks are used, and the independent consultant uses other market comparables, to help ensure the contract is best-in-class.

Audits are also an essential part of ensuring plan sponsors receive the full value of the PBM contract. National CooperativeRx audits the rebate guarantee payments quarterly and regularly monitors the PBM’s pricing performance. In addition, an annual claims audit is performed, and periodically, the rebate payments between Pharma and the PBM are audited. The claims and Pharma rebate audits are performed by an independent consultant.

In addition to providing plan design recommendations to plan sponsors that drive a higher-value pharmacy benefit, National CooperativeRx provides several oversight programs to drive fraud, waste, and abuse from plan spend. No conflict of interest exists with any of these programs because there is no additional fee to members. The Cooperative’s only incentive to enroll members in these programs is to drive higher-value care at a lower cost for members.

A highly competitive pricing arrangement with strong definitions and terms are crucial elements of our PBM contract. These elements, combined with regular audits and oversight over the PBM and plan spend, lead to best-in-class cost control of the pharmacy benefit and demonstrates procedural due diligence under ERISA. While words are not enough to defend compliance with fiduciary obligations, the Cooperative’s industry-leading trend metrics provide a solid measure to exhibit the success of our approach. From 2010 to 2022, the average annual increase in drug spend, net of rebates, across all National CooperativeRx members was only 1.4%.

The fiduciary duties of plan sponsors of health benefit plans are becoming more clear and more stringent. Understanding these duties is crucial for any employer who provides a health plan to its employees. Greater enforcement actions have been seen in the employer-sponsored retirement plan space and should be expected in the health benefit space as well.

National CooperativeRx offers a stress-free solution, with demonstrated due diligence done on behalf of plan sponsors. Our thoughtful approach should give great comfort to plan sponsors that they are, if ever questioned or challenged, able to demonstrate key factors for why and how they satisfied their fiduciary duties. As we continue with our PBM request for proposal for 2025, we have eyes on the fiduciary obligations of plan sponsors and will be prepared to provide documentation in support of these requirements.

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