Employer-sponsored health insurance covers over half of the U.S. population, with employers required by law to provide health insurance for workers under the Affordable Care Act. However, recent class action lawsuits filed against companies such as Johnson & Johnson and Mayo Clinic have raised concerns about how well employers are managing their health benefits. These lawsuits have cited the breaching of fiduciary duties under ERISA, which requires employers to administer health plans in the best interest of participants and beneficiaries.
The Consolidated Appropriation Act of 2021 has opened up more channels for litigation against employers for breaching fiduciary duties under ERISA, leading many employers to reconsider their hands-off approach to purchasing healthcare. This includes directly contracting with providers to lower healthcare spending, as insurers and administrators may not have the same incentives for cost savings. Employers need to ensure the accountability and integrity of insurers and administrators to avoid legal challenges for failing to fulfill their fiduciary duties.
Large employers like Boeing and Walmart are already directly contracting with hospitals and health systems, with platforms like Mishe offering cash-price based networks for employers. Direct contracting can lead to cheaper prices for prescription drugs as well, with options like Mark Cuban’s Cost Plus Drug Company and Costco offering lower prices than insurer negotiated rates. Congress should consider codifying price transparency legislation to facilitate employer-provider direct contracting and stimulate price competition.
Policymakers should also work to remove roadblocks preventing employers and workers from fully benefiting from cheaper cash prices, such as allowing cash payments to count toward deductibles and relaxing restrictions on HSA accounts. By fostering competition in the hospital market and encouraging innovative efforts from employers, the goal is to help employers fulfill their fiduciary duties and mitigate litigation risks while ultimately benefiting American workers. Employers play a critical role in bringing dynamism to the U.S. healthcare system and should be supported in their efforts to improve the management of health benefits for their employees.
