Recently there has been discussion surrounding the Johnson and Johnson class-action lawsuit. This lawsuit was brought on by a current employee who alleges the employer signed into an agreement with a Pharmacy Benefits Manager (PBM) that has contract exclusions prohibiting the plan users from obtaining generic specialty drugs at a cheaper cost outside of the PBM. In turn, the plaintiff alleges the plan sponsor cost participants millions of dollars in copayments, deductibles, premiums, and coinsurance. Please let it be known, that this case is still in active litigation.
What does this mean for the rest of us? If you are financially overseeing or controlling your employer-sponsored group health plan, then you have standards to meet under the Employee Retirement Income Security Act (ERISA). Self-funded and fully insured plans have the capabilities to be handled differently, it depends on the level of control one has over the employer-sponsored health plan(s). The fiduciary can be the board of directors, a specific person, the company itself, trustees, or a committee. We recommend naming a specific person within your plan documents. If you are simply creating, designing, or amending the employer-sponsored plan, you are not by default a fiduciary. A fiduciary is a person who implements, manages, and speaks on behalf of the plan and its beneficiaries making sure the plan is in the best financial interest of its participants and not that of the plan sponsor or employer. The fiduciary is also responsible for making sure the service partners, including the broker, are licensed and in good standing. It goes without saying, that all fees should be clearly defined, understood, and disclosed annually, breaking out the details of bundled fees.
The fiduciary needs to evaluate all plan options, services, costs, exclusions, prescription drug formularies, and contracts, and be sure to document the results. Being a fiduciary is a lot of responsibility and one that can hold you personally responsible if something goes wrong. There should be a fidelity bond covering the fiduciary, and chances are you already have one of these in place if you have property or a 401k plan. Under ERISA section 412 the fidelity bond will protect the plan against fraud bonding anyone who handles the plan assets or property even if said person is not the fiduciary.
In a nutshell, if it feels off or seems too good to be true, chances are it is. Do your diligence, question the document language, review contracts, understand what you are paying for, and set expectations.
If you are interested in learning more, this video is a great resource.
