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An Arkansas law regulating pharmacy benefit managers’ (PBMs) generic drug reimbursement rates, and affecting the cost of prescription drugs provided under ERISA-governed benefit plans and the administration of those plans, is not preempted by ERISA, the U.S. Supreme Court has held unanimously. Rutledge v. Pharmaceutical Care Management Association, No. 18-540, 2020 U.S. LEXIS 5988 (Dec. 10, 2020).

With Justice Sonia Sotomayor writing for the unanimous court, the Court held that Arkansas’s law is simple rate regulation and “ERISA does not pre-empt state rate regulations that merely increase costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage.” The Court explained that the law only sets a floor for pharmacy reimbursements by PBMs. It is not directed at ERISA plans, and the fact that PBMs may pass their increased costs on to ERISA plans is not ERISA’s concern.  More…

Takeaways

  • Republicans in the U.S. House of Representatives attempt to deliver on President Trump’s campaign promises in the One Big Beautiful Bill Act (BBB or the Act), which passed the House by a razor-thin margin of 215 in favor and 214 opposed on May 22, 2025. 
  • BBB shows favoritism of Health Savings Accounts and Health Reimbursement Account benefits, making changes to broaden their scope, increase utilization, and bolster savings.  
  • The Act also provides a glimpse into legislative or regulatory changes that may be on the horizon for ERISA-governed plans, including standards for Pharmacy Benefit Manager compensation, contractual requirements, and disclosures applicable to government-subsidized plans. 

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The goal of the U.S. Senate is to pass One Big Beautiful Bill in a form on which Senators can agree, send it back to the U.S. House of Representatives, who then would have it on President Trump’s desk for signature by July 4, 2025.  Time will tell whether this accelerated schedule is practical and what ultimately makes its way into federal law. 

Without getting too far ahead of the legislative process and certainly staying out of the weeds of the 1,038 pages of legislative proposals, the BBB reveals fringe benefit, health and welfare benefit, and executive compensation priorities.  The legislation also tips the hand of the Trump Administration, shining a light on areas in which we may see additional activity. 

HSA, HRA Improvements

It is clear that House Republicans like Health Savings Accounts (HSA) and Health Reimbursement Accounts (HRA).  There are pages of text aimed at expanding eligibility (including permitting Medicare-eligible enrollees to contribute to HSAs), increasing savings opportunities, allowing rollovers from other healthcare accounts, and permitting the reimbursement of qualified sports and fitness expenses.  If the Act becomes law, employers offering HSA or HRA benefits will have some new bells and whistles to add to their programs.  

Fringe Benefits That Make Education and Childcare More Affordable

With a focus on families and paying down student loan debt, BBB makes permanent an employer’s ability to make student loan debt repayments on a tax-favored basis under Section 127 of the tax code.  BBB also enhances the employer-provided childcare tax credit, further incentivizing employers to provide childcare services to their employees.  Whether the employer operates a childcare facility or pays amounts under a contract with a qualified childcare facility, BBB entices employers to add this much-needed employee benefit.   

Executive Compensation Changes

The executive compensation changes baked into BBB are designed to help pay for some of the other changes.  BBB expands the application of the excise tax on certain tax-exempt organizations paying compensation over $1 million (or excess parachute payments) to include former employees (think: severance).  BBB also requires public companies to allocate the Internal Revenue Code Section 162(m) $1 million deduction limit among controlled group members relative to compensation when specified covered employees receive pay from those related employers. 

Tax Cuts and Jobs Act Extension

A priority of President Trump, who touted extending his tax cuts during the campaign trail, BBB extends and makes permanent the Tax Cuts and Jobs Act changes.  For example, BBB permanently makes qualified moving expense reimbursements taxable.

Pharmacy Benefit Manager Regulation   

BBB also includes a few surprise new twists related to Pharmacy Benefit Managers (PBM).  Although the legislative reforms currently focus on Medicaid and prescription drug programs subsidized by the federal government (e.g., Medicare Part D plans, including Employer Group Waiver Plans for retirees absent a waiver), it is clear that the Trump Administration and Republicans in Congress seek transparent and fair pricing of prescription drugs.  These initiatives eventually may spill over to apply to ERISA-governed plans, in furtherance of President Trump’s Executive Orders advancing Most-Favored Nation prescription drug pricing and directing increased transparency over PBM direct and indirect compensation.  So, the changes are worthy of note by all employers that use PBMs. 

For Medicaid, BBB prohibits the “spread pricing” model in favor of “transparent prescription drug pass-through pricing model,” which essentially is cost-plus pricing.  No more than fair market value can be paid for PBM administrative services. 

In the case of Medicare Part D plans, BBB imposes contractual requirements limiting PBM compensation to bona fide service fees.  Rebates, incentives, and other price concessions all would need to be passed on to the plan sponsor.  Further, the PBM would be required to define and apply in a fully transparent and consistent manner against pricing guarantees and performance measures terms such as “generic drug,” “brand name drug,” and “specialty drug.” 

Transparency also is paramount.  BBB requires PBMs not only to disclose their compensation, but also their costs and any contractual arrangements with drug manufacturers for rebates, among other details.   

It certainly is possible these PBM reforms are coming to an ERISA plan near you.  BBB provides a roadmap for the Department of Labor’s Employee Benefits Security Administration to issue ERISA fiduciary standards, best practices, or disclosure requirements.

The Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here.

Takeaways

  • Employers who sponsor group health plans should review and revise, as needed, their consumer-facing pricing information for any compliance issues under the Executive Orders and applicable regulations.

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On February 25, 2025, President Trump signed “Making America Healthy Again with Clear, Accurate, and Actionable Healthcare Pricing Information,” an Executive Order with the stated purpose of making group health plans and health insurance issuers accountable for compliance with price transparency rules implemented during the first Trump administration.

Specifically, during his first administration, President Trump signed Executive Order 13877 – “Improving Price and Quality Transparency in American Healthcare to Put Patients First,” seeking to address what the new Executive Order describes as “opaque healthcare pricing arrangements” and insufficient accountability concerning healthcare pricing practices.  Under Executive Order 13877, regulations were created requiring group health plans to:

  • Post their negotiated rates with providers;
  • Post out-of-network payments to providers;
  • Post the actual prices the plan or its pharmacy benefits manager pays for prescription drugs; and
  • Maintain a “customer-facing” internet tool through which individuals can access price information. 

The new Executive Order referenced an unidentified 2023 economic analysis that estimated full implementation of the regulations might result in as much as $80 billion in healthcare savings by 2025 for consumers, employers, and insurers.  An unidentified 2024 report was also referenced for the proposition that price transparency could help employers reduce healthcare costs across 500 common healthcare services.

To address what was described as “stalled” progress on price transparency during the intervening administration, the new Executive Order gave the Secretaries of the Treasury, Labor, and Health and Human Services 90 days to act to:

  • Instead of estimates, require the disclosure of actual prices of items and services;
  • Ensure pricing information is standardized and easily comparable across health plans and hospitals by issuing updated guidance or proposed regulations; and
  • Ensure compliance with transparency requirements by issuing guidance or proposed regulations updating enforcement policies.

The Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.  Subscribe to the Benefits Law Advisor Blog here.

As we conclude our “Health Plan Hygiene” blog series, we reflect on the important insights shared about fiduciary responsibilities under the Employee Retirement Income Security Act of 1974 (ERISA) and highlight the risk posed by recent group health plan fiduciary litigation and offered strategies for mitigating these risks by meeting ERISA obligations. We have explored best practices for evaluating, selecting, and contracting with third-party administrators, emphasizing the importance of cybersecurity protocols for health plan data, and discussed the proactive review of third-party vendor fee arrangements, including pharmacy benefit managers and broker compensation structures.

As health and welfare plan fiduciaries prepare for the year ahead, how can they remain vigilant in identifying and executing their responsibilities in a climate of increasing compliance demands and associated risk?  

  1. Set up a fiduciary committee. Where a health and welfare plan document permits delegation, a named fiduciary, such as the plan administrator, may wish to delegate some of its fiduciary duties to a health and welfare plan fiduciary committee. Fiduciary committees are designed to act solely in the best interests of plan participants and beneficiaries by ensuring prudent policies and procedures are in place. A fiduciary committee typically includes designated decision-makers and at least one person with intimate knowledge of the plan’s written terms, day-to-day operations, and the plan sponsor’s participant population, such as an HR professional with a benefits background. While the delegator shares responsibility for ensuring that the committee executes its duties properly, the committee can help the delegator stay abreast of evolving compliance requirements and best practices. The committee may want to adopt a charter that addresses, at a minimum, the committee’s purpose, scope of authority and responsibilities, meeting frequency, and committee membership, including appointment and removal procedures.
    1. Document decision-making. Establish and consistently use internal recordkeeping procedures for all fiduciary decisions and actions taken regarding the plan. For example, the fiduciary committee should take minutes during all meetings to reflect on the topics discussed and the reasoning behind its decisions. Clear documentation of the decision-making process promotes transparency and becomes critical if a plan is audited or sued.
    1. Mindfully negotiate and monitor service provider contracts. Health and welfare plan fiduciaries may want to establish and use prudent processes when selecting service providers. For example, the fiduciary might request proposals from multiple service providers to assess whether the terms are appropriate for the current market. Once a service provider is selected, the fiduciary is wise to stay updated on all contracts and operations regarding the plan to ensure the terms are written and performed in the best interest of plan participants and beneficiaries. Fiduciaries may also reassess and re-negotiate fees when appropriate.
    1. Ensure plan expenses are reasonable. The fiduciary has a duty to ensure plan expenses are reasonable, including any compensation paid to experts and third-party service providers.
    1. Conduct an internal audit. ERISA requires certain employee benefit plans to submit to an annual independent audit, a report of which is filed with the Department of Labor. However, some welfare plans, such as those that covered fewer than 100 participants at the beginning of the plan year if the plan is fully insured, unfunded, or a combination of fully insured and unfunded, are excluded from this requirement. Regardless of whether an audit is required, voluntarily conducting an independent audit facilitates proper plan governance and often helps identify opportunities to improve compliance.

    For questions, please contact a Jackson Lewis Employee Benefits Practice Group member or the Jackson Lewis attorney with whom you regularly work.

    Our “health plan hygiene” series has focused on steps that fiduciaries of employer-sponsored group health plans can take to ensure they meet their fiduciary responsibilities.  This issue has been brought to the forefront recently due to a wave of class action lawsuits that have been brought against group health plan fiduciaries.  In our last post, we discussed the importance of a thorough RFP process and an overview of important contractual provisions.  This post will address the issue at the center of those class action lawsuits:  the fees.   

    Third-Party Vendor Fee Arrangements

    Health plan fiduciaries have the duty to ensure that the fees paid to third-party vendors are reasonable.  This can feel like an overwhelming task because health plans, especially self-insured health plans, can hire multiple third-party vendors to keep the plan running.  For example, third-party administrators (“TPAs”), network providers, repricing servicers, claims auditors, pharmacy benefit managers (“PBMs”), telehealth providers, and behavioral health providers may all be involved in the administration of a single health plan.  

    Health plan fiduciaries should educate themselves on the potential pricing methods and fee arrangements with each of the third-party service providers.  For example:

    • “Bundled” Services and Fee Arrangements.  Because of the seemingly endless number of third-party vendors that may be required for health plan administration, fiduciaries will often rely on one TPA to manage and contract with the other third-party vendors.  While this can ease the burden of tracking multiple vendors, it remains the fiduciaries’ duty to ensure that the fees are reasonable for each vendor.  That means that the fiduciaries must understand the services provided by each vendor, and the fees charged by each vendor.  Fiduciaries should not rely on the TPA to manage the overall fees or to provide one total billed amount for all vendors without a breakdown.
    • Pharmacy Benefit Managers.  The recent class action lawsuits have focused heavily on PBM fees.  PBM fee structures have historically been complex and not particularly transparent, so it is essential that plan fiduciaries understand PBM pricing models. 
      • Pass-Through Pricing.  Under the pass-through pricing model, the PBM charges the plan the drug acquisition cost (the amount paid to the drug manufacturer).  Any negotiated rebates are also passed through to the plan.  The PBM receives compensation from the plan via a per-employee or per-month rate to the plan.  Proponents of the pass-through pricing model argue that pass-through pricing provides the most transparency and consistency for the plan.
      • Spread Pricing.  Under the spread pricing model, the PBM and the plan set the price that the plan pays for prescription drugs by reference to a specific benchmark price.  The PBM then negotiates a lower price with the drug manufacturer, and the PBM receives compensation on the difference (the “spread”) between the PBM’s acquisition cost and the benchmark price.  PBMs in this arrangement are financially motivated not to make formulary decisions based on which drugs have the lowest cost to the plan and beneficiaries but rather based on which drugs have the most significant spread.
      • Rebates.  PBMs negotiate rebates from drug manufacturers. The PBM may keep all or a portion of the rebate instead of paying the rebate back to the plan. 
    • Brokers.  Fiduciaries will often hire brokers to help identify and retain service providers for a health plan.  Brokers can provide an important service.  However, some brokers enter into commission or other compensation arrangements with service providers.  It is essential that plan fiduciaries are aware of any compensation or commission arrangements between a broker and other third-party vendors to ensure that the broker is providing the best objective recommendations, not recommendations motivated by financial gain. 

    Potential Impacts

    Recent class actions have highlighted the complexities and potential liabilities associated with third-party vendor fees. It is essential fiduciaries be well-informed about current third-party vendor contracts or agreements, including their termination or renewal periods. These periods can offer opportunities to reassess and renegotiate fees.

    As your representative, the Jackson Lewis Employee Benefits Practice Group members can assist if you have questions or need assistance, especially when selecting service providers. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.

    Background

    Section 1557 is the non-discrimination provision of the Affordable Care Act (ACA).  Section 1557, which has been in effect since 2010, is intended to prevent discrimination in certain health programs or activities that receive federal financial assistance.   In May of 2024, the Department of Health and Human Services’ (HHS) Office of Civil Rights (OCR), the agency responsible for the implementation and administration of Section 1557, issued final regulations governing Section 1557 (the 2024 Final Rule).  The 2024 Final Rule is not OCR’s first bite at this apple.  In fact, the 2024 Final Rule represents OCR’s third attempt to establish regulations under Section 1557: 

    The 2024 Final Rule is based on the NPRM and comments received in response to it. While the Rule applies broadly to nearly every healthcare industry sector, this article addresses its impact on employer-provided group health plans. 

    Scope of the 2024 Final Rule

    Under the 2024 Final Rule, a “covered entity” receiving federal financial assistance is prohibited from discriminating on the basis of “race, color, national origin, sex, age, disability, or any combination thereof” concerning the provision or administration of health benefits.   For this purpose, a “covered entity” includes any health insurance issuer, broker, pharmacy benefit manager, or third-party administrator receiving federal financial assistance, including Medicare payments, grants, loans, credits, subsidies, and contracts.  The preamble to the 2024 Final Rule states that most employer-provided group health plans are not covered entities.  However, because the 2024 Final Rule will apply to most service providers, the rule will indirectly affect employer-provided group health plans.   

    Protections Under the 2024 Final Rule

    The 2024 Final Rule clarifies OCR’s position on certain open issues affecting employer-provided group health plans, notably:

    • Transgender Care.  Section 1557 and the journey to the Final 2024 Rules have been largely driven by litigation surrounding coverage of gender-affirming care.  On the heels of Bostock, the 2024 Final Rule attempts to establish that the federal prohibition against discrimination on the basis of “sex” includes gender identity.   The 2024 Final Rule specifies that sex discrimination includes discrimination on the basis of “sex characteristics, including intersex traits … sexual orientation; gender identity; and sex stereotypes.”  This means that covered entities are prohibited from denying, limiting, or otherwise excluding gender-affirming care or placing stricter restrictions or more significant cost-sharing requirements on services performed for gender-affirming care as those imposed on the same services when performed for other medical diagnoses.   

    The 2024 Final Rule attempts to ward off challenges to the prohibition against categorical exclusions of gender-affirming care by preempting those challenges. The 2024 Final Rule explicitly states that, to the extent states have laws prohibiting gender-affirming procedures, Section 1557 preempts such laws. The state of Florida has already challenged this preemption provision.    

    • Pregnancy and Abortion.    The 2024 Final Rule also clarifies that “sex discrimination” includes discrimination related to pregnancy and pregnancy-related conditions.  The 2024 Final Rule does not address abortion.  However, in the preamble, OCR affirms that Section 1557’s protections include discrimination in abortion coverage.  However, the 2024 Final Rule does not require the coverage of abortion and is not intended to override any state-specific laws regarding abortion.  Under Section 1557, a decision not to provide abortions is discriminatory only if the decision is applied differently based on prohibited classifications. 

    Conscience Exemption

    Throughout the 2024 Final Rule, OCR specifies that Section 1557 should not be construed to affect federal laws regarding conscience or religious protection.  Covered entities can either rely on the federal protections for religious freedom and conscience laws or apply for a “conscience exemption” from the OCR.  Because the 2024 Final Rule directly governs covered entities, not plan sponsors, employers seeking a conscience or religious exemption from Section 1557 may not be able to rely on the 2024 Final Rule as the basis of such exemption.    

    The Path Forward

    Generally, the 2024 Final Rule is effective as of the first day of the first plan year beginning on or after January 1, 2025.  However, the 2024 Final Rule will likely have the same challenging road as its predecessors.  Litigation involving prior Section 1557 legislation remains pending in more than one federal district court.  And, on May 6, 2024, mere days after the 2024 Final Rule was passed, the state of Florida filed a lawsuit on behalf of a religious medical group seeking an injunction against the 2024 Final Rule. 

    While it may seem the 2024 Final Rule is the last word on the topic, until the legal challenges are resolved, one would be wise to contact a knowledgeable ERISA attorney with questions.  The Jackson Lewis Employee Benefits Practice Group members can help if you have questions or need assistance. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work.

    To all those who work in the employee benefits arena, whether in legal, finance, benefits administration, payroll, tax, human resources, or many other disciplines, this is our annual reminder to celebrate the valuable and important work done for employees, beneficiaries, and Plan Sponsors alike.

    This year, we focus on the increased attention on all things related to health and welfare plans.

    Employer-sponsored health plans are perhaps the most common (and expected) benefit plan offering for employers of all sizes and industries, particularly following the enactment of the Affordable Care Act’s (ACA) employer mandate.  While plan designs, healthcare costs, and the delivery of healthcare services themselves have considerably evolved over the years, the compliance burdens and risks associated with maintaining such plans are evolving as well.

    Over the last few years, we have highlighted the mounting compliance concerns for employer-sponsored health plans.  Beyond the Employee Retirement Income Security Act (ERISA), the federal tax code, COBRA, HIPAA, and the ACA, group health plans must navigate mandates imposed under the Mental Health Parity and Addiction Equity Act (MHPAEA) and transparency requirements under the Consolidated Appropriations Act of 2021 (CAA).  On top of these federal considerations, plan sponsors and fiduciaries must also navigate benefit offerings in a post-Dobbs-world where varying state legislation, regulation and litigation are pushing at the boundaries of ERISA preemption.  Most recently, these efforts have raised questions surrounding the provision of fertility/IVF benefits and transgender benefits.

    Similarly, while the bulk of ERISA fiduciary litigation, and specifically class action litigation, have been focused on qualified retirement plans holding significant plan assets, there is renewed attention on group health plans.  Rising healthcare costs, complex designs, and an increased focus (both state and federal) on pharmacy benefit managers (PBMs) have thrust the fiduciary process surrounding these plans into the spotlight.

    With so many moving pieces and evolving guidance, plan sponsors are well advised to revisit their governance and administration surrounding health and welfare plans.  This includes confirming the fiduciary process in place and following best practices surrounding the administration and decision-making related to these plans.  Just as in the retirement plan context, plan fiduciaries need to engage, monitor, and leverage trusted vendors in this space.  Given the complexities in benefit design and cost structures embedded in health plans, a prudent process that uses all available resources is key to establishing a plan design and structure that maximizes value for participants.

    And don’t forget the proper handling of claims and appeals.  ERISA has specific processes and timelines for handling claims and appeals.  Strictly following that process (as outlined in plan documents and summary plan descriptions) allows for a deferential standard of review should a claim dispute head to litigation.  As part of that process, plan sponsors and fiduciaries often receive requests for documents and plan or claim-related information from medical providers and attorneys in an attempt to collect payments from plans.  These requests should be reviewed timely and carefully with legal counsel and third party administrators to determine what should be provided and when.

    In short, on this National Employee Benefits Day, as with all others, important work continues.  While the considerations applicable to health and welfare plans are not new, they are complicated and an area of increased attention.  Please contact a member of the Jackson Lewis Employee Benefits Practice Group if you need any assistance.

    Subscribe to our blog (Benefits Law Adviser), newsletter, and mailing list to stay informed. 

    It’s hard to believe that 2024 is well underway! That means it’s a perfect time to think about an issue that might get lost in the summertime and (dare I already say) year-end shuffles: fiduciary committees.

    ERISA imposes fiduciary duties on those considered a fiduciary under an ERISA-covered plan. Generally, absent a delegation, the board of directors is considered the plan fiduciary—meaning the board is subject to the complex duties and obligations imposed on plan fiduciaries. It’s now common, if not the norm, for the board to delegate its fiduciary duties to a fiduciary committee. But having a committee isn’t a set-it-and-forget-it situation—it requires regular action to ensure the committee is properly undertaking its role as a plan fiduciary.

    Below are some best practice items committees should consider annually:

    Review the committee charter. The committee charter often sets out details about what authority has been delegated to the committee and about the processes that the committee must or may follow in carrying out its duties and responsibilities. Regularly reviewing the charter not only helps to make sure the committee is adhering to those duties and responsibilities, but it can also help identify areas that may need adjustment.

    Schedule fiduciary training. ERISA sets out fiduciary duties that apply to plan fiduciaries, including the duty of loyalty, the duty to act prudently, the duty to follow plan documents, and the duty to diversify investments.  There is a lot packed into these concepts—it is essential that plan fiduciaries understand these duties and what they mean for handling issues related to their plan. Fiduciary training is not only crucial for new committee members but also a valuable refresher for existing committee members. A recent court cited a committee’s regular fiduciary training as evidence of its prudent process and compliance with its fiduciary duties.

    Consider establishing a committee for your health and welfare programs. While the focus of fiduciary duties is often aimed at qualified retirement plans, ERISA applies fiduciary duties to ERISA-covered health and welfare programs.  This fact has been in the spotlight recently with the rise of fee litigation targeting fiduciaries concerning oversight and operation of prescription drug benefits, including pharmacy benefit manager arrangements.

    Schedule regular committee meetings and document the process. Having regular committee meetings helps make sure the committee is adhering to its duties and engaging in proper oversight of the plan(s). Committees can bring in their hired experts to help them evaluate plan issues and make decisions. Don’t forget to keep minutes so the committee has a well-documented record of its process.

    Review the fiduciary liability insurance policy. ERISA imposes personal liability on plan fiduciaries. Fiduciary liability policies generally provide coverage for claims related to the administration and operation of retirement and health and welfare plans. Having an up-to-date, robust policy is a vital part of making sure the fiduciaries (and the plan) are prepared to face the seemingly never-ending litigation targeting plan fiduciaries.

    The attorneys at Jackson Lewis have deep experience establishing and working with fiduciary committees, including providing fiduciary training.  If you have questions or would like assistance in establishing or operating a fiduciary committee, please get in touch with an Employee Benefits Practice Group team member or the Jackson Lewis attorney with whom you regularly work.

    Most employers know that if a group health plan provides mental health or substance use disorder (MH/SUD) benefits in any of six specified classifications, the plan must provide MH/SUD benefits in all specified classifications in which the plan provides medical or surgical (M/S) benefits. Additionally, the 2008 Mental Health Parity and Addition Equity Act (MHPAEA) requires plans to ensure that the financial requirements and treatment limitations (quantitative or nonquantitative) imposed on MH/SUD benefits are no more restrictive than those imposed on M/S benefits. While the United States Department of Labor’s Employee Benefits Security Administration (EBSA, which enforces employer-sponsored plans’ compliance with the MHPAEA) has proclaimed that it already has issued multiple compliance navigation guides for plans, the truth is that the guidance issued to date has lacked sufficient detail and failed to account for the actual circumstances necessary to be helpful to employers. Meanwhile, EBSA is investigating employer plans for compliance, publicly naming those that it deems fall short, and encouraging plan participants to demand written disclosures of details that are largely unavailable.

    The Road and Navigation Systems Still Are Under Construction

    EBSA has issued multiple requests for comments and guidance over the past couple of decades in connection with the MHPAEA. EBSA’s guidance includes 2013 final regulations, a self-compliance tool, 2019 FAQs (in which it listed examples of nonquantitative treatment limitations or NQTLs), and 2021 FAQs (in which it announced that it would begin investigating plans for compliance with the NQTL comparative analysis documentation requirements that became effective that year). One thing all of the prior guidance has in common is a failure to acknowledge that the employer, who’s usually ultimately accountable for compliance, has virtually no way to assess whether its group health plan complies with the mental health parity requirements. Except in rare circumstances, employers don’t select network providers, don’t negotiate reimbursement rates, don’t determine what preauthorization requirements will apply for what covered services, don’t know what’s medically necessary, and don’t know what claims have been approved or denied or why. So, for employers, the road to compliance is like driving through a construction zone without navigation and with multiple speed traps and caution signs posted in a foreign language. Employers need a roadmap and a way to navigate the many obstacles and construction zones on the route to compliance.

    The recently-issued proposed regulations we blogged about last month are somewhat helpful because they provide more specific information about what data plans must collect and consider in order to design and apply NQTLs. This includes evaluating historical data comparing in- and out-of-network utilization rates and provider reimbursement rates – information the employer has to extract from the plan’s third-party administrator. While EBSA acknowledged the challenges employers face in collecting and evaluating the data needed to determine compliance, it still expects plans to show the analysis undertaken and the steps taken to mitigate material differences in access to MH/SUD benefits compared to M/S benefits. The EBSA (and other federal agencies) annual reports to Congress, which describe the agencies’ findings in enforcement investigations and highlight the agencies’ primary concerns regarding mental health parity, are also potentially helpful. For example, chief among the concerns highlighted is network adequacy. The agencies cite what’s been reported as a “growing disparity” in in-network reimbursement rates between MH/SUD providers and M/S providers, which drives down MH/SUD providers’ network participation and, therefore, increases the cost of MH/SUD services for patients.

    How Employers Can Navigate A Road That’s Still Under Construction

    It’s obvious that federal agencies are still gathering the information they think is relevant and necessary to provide meaningful guidance and enforcement. So, for now, employers should develop and document a compliance program using what is available to show a good faith effort to comply with the MHPAEA, including the NQTL comparative analysis requirement.

    Any such compliance program should include these steps:

    • Determine which vendors to contact to gather the necessary documentation and information. In addition to the insurer or third-party administrator (TPA) for the group health plan, this may also include, for example, a behavioral health administrator and/or pharmacy benefit manager.
    • Develop a list of specific questions for the insurer/TPA and other vendors that will enable the employer to gather the information needed to determine whether the plan complies with the MHPAEA, including the NQTL requirements. It is helpful to reference the DOL self-compliance tool to develop an effective list of questions and to use its framework to document the compliance review effort. One should also incorporate the data elements in the recently issued proposed regulations. If the plan service provider has conducted and documented a compliance review itself, particularly the required NQTL comparative analysis, this will save the employer an enormous amount of time and other resources.
    • Document all communications with the insurer/TPA and other vendors, particularly those from whom one requests assistance gathering the data necessary to ensure MHPAEA compliance.
    • Analyze the data provided by the insurer/TPA and other vendors, both on a granular level and in the aggregate, using available EBSA guidance to help spot disparities. If needed, develop follow-up questions to the insurer/TPA and other vendors regarding any coverage disparities between MH/SUD and M/H benefits, the application of utilization review to MH/SUD benefits, and/or the reasoning behind MH/SUD claims denials.
    • If needed, identify areas of concern and pursue corrective action.  Retain all communication with the insurer/TPA or other vendor involved. 
    • If needed, update administrative services agreements to ensure ongoing cooperation from TPAs and other plan service providers in evaluating compliance, correcting compliance issues, and making required disclosures.

    Bear in mind that MHPAEA compliance is an ongoing trip and should be revisited annually and whenever EBSA issues meaningful additional guidance. Employers can attend a free webinar on the proposed regulations that the federal agencies sponsor on September 7, 2023. Also, employers or employer groups interested in helping shape the final regulations have until October 2, 2023, to submit written comments on the proposed regulations. 

    The attorneys in the Employee Benefits Practice Group are available to assist clients with developing and documenting their MHPAEA compliance programs and preparing comments on the proposed regulations. Please contact a Jackson Lewis employee benefits team member or the Jackson Lewis attorney with whom you regularly work if you have questions or need assistance.