Finding Common Ground: Addressing PBM Issues and ERISA Tensions

There is a need for reform to balance employer uniformity with addressing harmful pharmacy benefit manager (PBM) practices, according to a panel discussion at the Community Oncology Alliance (COA) Payer Exchange Summit.¹

"There have been a number of amendments to ERISA, expanding the protections available to health benefit plan participants and beneficiaries. One important amendment, the Consolidated Omnibus Budget Reconciliation Act (COBRA), provides some workers and their families with the right to continue their health coverage for a limited time after certain events, such as the loss of a job."² | Image credit: Vitalii Vodolazskyi - stock.adobe.com

The panel discussion highlighted the tension between state regulation of PBMs and Employee Retirement Income Security Act (ERISA) preemption, emphasizing the need for reforms that balance the interests of self-insured employers, who benefit from ERISA's uniformity, and the need to address harmful PBM practices, with potential incremental progress at the state level leading to broader federal reforms.

The panel began by discussing the complexities of ERISA, which initially focused on pensions but has since expanded to self-funded health insurance.² The conversation emphasized the importance of ERISA preemption, which allows employers to offer uniform health plans across multiple states, but noted growing tension as states attempt to regulate PBMs. Katy Johnson, senior counsel, health policy, American Benefits Council, emphasized how ERISA has allowed large employers to maintain flexibility, though it has also led to conflicts between state and federal regulations.

“ERISA preemption, this idea and this law that says that ERISA is the one that dictates what that health plan has to do, not all the 50 states, is really, really important and fundamental, one of the most important pieces of law that allows employers to offer health coverage, which is, generally speaking, a voluntary exercise,” she noted.

Jesse Dresser, director of state regulation and policy at COA, highlighted the real-world challenges faced by health care practices due to ERISA preemption, particularly with PBM practices—including patients being directed to PBM-owned pharmacies, which limits access to care. He also mentioned that state laws attempting to address these issues often face legal challenges because of ERISA's preemption.

“You have these very real problems. And when we go to try to challenge it, we go to try to fight it, we're running up against the brick wall that the PBM comes back and says, ‘Well, this is the risk of plan. The state law isn't going to apply.”

Shawn Gremminger, president and CEO, National Alliance of Healthcare Purchaser Coalition, spoke about the value ERISA offers to self-insured employers, but acknowledged that reforms are necessary, particularly to regulate PBMs. He advocated for federal-level reforms to address these issues, which would provide a unified solution rather than a fragmented approach through state laws.

“Employers have a fiduciary responsibility to prudently oversee the health plan. The point being, if the PBM or TPA is not doing their job, we are the ones who get sued. Even though they are our consultants and contractors, we remain liable. One of the things that ERISA could address, and that the National Alliance might support, is placing more responsibility on those managing health plans day-to-day. This could involve placing a fiduciary responsibility on health insurers acting as administrators and PBMs to ensure they are meeting their obligations, rather than finding ways to increase prices or obscure their revenue practices,” Gremminger explained.

The discussion also covered lobbying challenges, as highlighted by Jeff Mortier, partner at Farragut Partners, who noted the difficulties in pushing for federal legislation due to ERISA's complex preemption laws. He emphasized the importance of state-level efforts to build momentum for potential federal changes. The panelists agreed that finding common ground between stakeholders, such as employers, providers, and policymakers, is critical to making progress.

The session concluded with a focus on potential federal reforms. While changing ERISA directly poses significant challenges, the panelists suggested that narrow, targeted reforms could help address specific problems, such as PBM practices, without undermining the overall benefits of ERISA. Audience questions further explored the role of federal consumer protection laws and state-level reforms in driving change, with the panelists reinforcing the need for collaboration among all stakeholders to push meaningful progress forward.

References

1. Dresser J, Gremminger S, Johnson K, Lee J, Mortier J. The ERISA conundrum: impact of federal laws on reform efforts. Presented at: COA Payer Exchange Summit; September 9-10, 2024; Reston, VA.

2. ERISA. Department of Labor. Accessed September 9, 2024. https://www.dol.gov/general/topic/health-plans/erisa#:~:text=The%20Employee%20Retirement%20Income%20Security,for%20individuals%20in%20these%20plans