The Employee Retirement Income Security Act of 1974 (ERISA) provides private employers and individuals covered by employer-sponsored retirement and health plans with certain protections codified in federal law. ERISA generally prevents states from imposing conflicting, duplicative, and costly administrative requirements on self-insured health plans of private employers. Unfortunately, these protections have come under attack in recent years.
Pharmacy benefit managers (PBMs) work with self-insured health plans to design prescription drug benefits that are convenient and cost-effective for plans and participants. Best practices in cost share requirements, plan design features, and other programs encourage plan enrollees to choose lower-cost, higher-quality healthcare, and reward them with lower out-of-pocket costs if they do so.
While ERISA preemption of state laws has been incredibly helpful to employers, not everyone is happy about this result. Certain pharmaceutical companies and pharmacy groups initially tried to encourage states to pass direct restrictions on ERISA-covered, self-insured health plans. Courts rejected many of those attempts as being unlawful due to ERISA preemption. So, the pharmaceutical companies and pharmacy groups set their sights on ways to indirectly accomplish what they could not directly accomplish. They theorized that if they could get states to regulate PBMs – the key vendor for self-funded health plans – they could have states indirectly regulate health plans, by directly regulating PBMs.
Unfortunately, pharmaceutical companies and certain pharmacy groups have been very successful in lobbying state legislatures to pass new regulations on PBMs. Every state has now passed new restrictions on PBMs. Many of these new laws directly benefit the financial interests of Pharma and pharmacies. Who pays the cost? Too often, it is the plan sponsors of self-funded health plans.
This is not how it was supposed to work. ERISA was designed to preempt this type of state law intrusion against private employers and their self-funded health plans. Without the protection of ERISA, employers with plan enrollees in multiple states will have an overwhelming amount of additional – or even directly conflicting – state rules to follow. This type of overregulation will severely hamper an employer’s ability to design a benefit plan to meet the needs of its employees and their families.
New laws in two different states illustrate the problem. Both Minnesota and Florida have recently passed new restrictions on PBMs. Minnesota expressly stated intent to apply state PBM laws to ERISA-covered, self-funded plans, including out-of-state plans providing coverage to Minnesota residents. These requirements remove an employer’s ability to penalize or incentivize a plan enrollee in any way for using a certain pharmacy. The new laws also prohibit mandatory mail and exclusive specialty – strategies employers use to help control prescription drug costs.
Florida’s law may be even more burdensome. It limits the PBM pricing model to pass-through, requires parity between retail and mail copays, prohibits mandatory mail, and prohibits exclusive specialty. Unless a court limits the scope of these laws, employers will struggle to provide higher-value healthcare under their prescription drug plans.
Under ERISA’s fiduciary duty rules, plan fiduciaries should keep themselves apprised of new legal developments. Many members have asked National CooperativeRx for a “refresher” on how ERISA’s fiduciary duties apply to clients when they administer their self-funded, ERISA-covered health plans.
Given this, National CooperativeRx hosted a webinar by Mary Stoll of Stoll Law Group. Ms. Stoll is an attorney for several Taft-Hartley health plans, as well as for our long-time partners, Pacific Health Coalition. She outlined the basics of ERISA, its importance, and recent attacks on ERISA. If you would like access to the recording, please reach out to your National CooperativeRx account representative.
Employers self-insure their health benefit to provide employees and their families with a cost-effective, yet substantial benefit, to meet the needs of their population. Flexibility to meet those needs and drive higher-value care is paramount. The recent attacks on ERISA’s preemption powers means employers need to engage and support efforts to maintain these powers. Without them, both employers and patients are at risk of costly administrative burdens and higher-cost healthcare.
To support efforts to protect ERISA powers, National CooperativeRx has lent its name to national campaigns to educate Congress on the importance of ERISA preemption. Any employer or Taft Hartley fund who wishes to also lend their name can do so by contacting me directly.