By: Brady Bizarro, Esq.
In a move that’s already generating buzz across the healthcare landscape, Health and Human Services Secretary Robert F. Kennedy, Jr. recently announced that the country’s largest health insurers have agreed to voluntarily streamline the controversial prior authorization process. It is a bold initiative aimed at reducing delays and denials that can prevent patients from receiving timely care. Major insurers including UnitedHealthcare, Aetna, Cigna, Blue Cross Blue Shield, Humana, and Kaiser Permanente have pledged to implement a range of reforms designed to make prior authorization more transparent, faster, and fairer.
At the heart of Kennedy’s plan is an effort to eliminate the bureaucratic friction that patients and doctors often face when navigating insurance approvals. Prior authorization, though originally intended as a cost-control mechanism, has morphed into a significant obstacle in the delivery of healthcare. Patients sometimes wait days or even weeks for approval of medications, surgeries, or tests — delays that can worsen outcomes and drive up long-term costs. By securing this industry-wide pledge, RFK Jr. hopes to sidestep the slow churn of federal rulemaking or legislative battles and instead push for swift, voluntary compliance.
Whether this strategy will work is another question entirely. Voluntary reforms sound promising in theory, especially when they allow for quicker implementation without red tape. The insurers involved represent a substantial share of the market, which could mean real change for millions of Americans. Moreover, the agreement includes timelines and measurable goals, like reducing the number of services requiring prior authorization and implementing real-time decision tools by 2027.
But there is reason for skepticism. This is not the first time insurers have promised to clean up the prior authorization mess. Past pledges — like those in 2018 and 2023 — have largely failed to produce meaningful, lasting change. Without binding enforcement or penalties, there is little to compel insurers to follow through once public scrutiny fades. Critics argue that these promises may be more about optics than outcomes, designed to deflect pressure from regulators and lawmakers. If results do not materialize, Kennedy may be forced to revisit a more traditional policy route involving regulation or congressional action.
Still, the potential impact on the healthcare system is enormous, especially for our industry. For employers who self-fund their plans, that is, who directly bear the financial risks of their health plans, a more efficient prior authorization process could translate into fewer delays, reduced appeals, and lower administrative costs. Employees would benefit from faster access to necessary care, while employers could see improvements in workforce productivity and satisfaction.
In particular, the appeals process stands to benefit here. By improving transparency and requiring medical professionals to review clinical denials, the initiative could dramatically reduce unnecessary disputes and reprocessing of claims. The agreement also includes a commitment to honor existing authorizations for 90 days when patients switch plans — an issue that has long plagued employer-sponsored plans during coverage transitions.
Of course, there are pitfalls. If insurers walk back their commitments after deadlines pass, the system could end up in worse shape than before. Smaller carriers not included in the pledge may continue business as usual, creating a fragmented and uneven landscape. And while the digital modernization of the prior authorization process is welcome, technology alone will not fix the core problem if insurers still deny requests based on opaque criteria.
Ultimately, Kennedy’s initiative is an ambitious attempt to drive meaningful reform without legislative gridlock. It sets a high bar — and if insurers meet it, this could be a watershed moment in modernizing health insurance. But if they do not, it may serve as a strong argument for finally codifying reforms into law.
For self-funded employers and plan sponsors, the coming months will be crucial. Now is the time to scrutinize vendor contracts, push for compliance, and demand transparency. Voluntary reform is a gamble — but one that just might pay off if backed by persistent oversight and public accountability.
By: Nick Bonds, Esq.
We all make mistakes. We overlook small things – often to no major consequence. But every now and then small mistakes can cause a ripple effect. Even minor oversights can make big waves. That may be exactly what is happening right now with Novo Nordisk’s patent on Semaglutide in Canada.
A quick refresher on patents: a patent is the government-granted right to exclude others from making, using, or selling an invention or technology for a limited period of time. In exchange for publicly disclosing how their invention works, patent holders are granted a temporary monopoly – which is particularly valuable in the world of pharmaceuticals. Drugmakers like Novo Nordisk use patents to lock in exclusive rights to manufacture and sell hugely profitable medications like Ozempic and Wegovy, both based on the active ingredient Semaglutide.
Patents in the U.S. and Canada commonly last for 20 years (though there are ways to extend their protection). Once a patent expires, however, other manufacturers are largely free to step in and produce “generic” versions of the drugs. Generally, these are available at a much lower cost to patients and health plans.
So what happened with Novo Nordisk? Well, filing a patent comes with a few associated costs, and the patent holder generally must pay annual renewal fees for the life of their patent to keep it active. It appears that Novo Nordisk filed for patent protection of their Semaglutide drugs in Canada, but for whatever reason has neglected to pay the relatively modest maintenance fees and their patents are now set to expire. In other words, by failing to cough up a few hundred dollars and complete some paperwork, Novo Nordisk has effectively forfeited its monopoly on the sale and manufacture of one of the most profitable drugs in the world – at least in Canada.
To be clear, Novo Nordisk U.S. patents remain intact, and the company still holds a monopoly on the manufacture of Ozempic and Wegovy here. But this misstep at the Canadian patent office means we could be about to see a booming industry in producing generic Semaglutide drugs just over the border. This would ignite a surge in importation of these weight loss drugs and pharmacy tourism, as U.S. plans and participants are eager to get their hands on these medications. Even if generic Canadian Semaglutide drugs don’t immediately flood the U.S. market, the mere existence of cheaper generic options could put huge downward pressure on the price of these drugs domestically. For self-funded group health plans already struggling with how (or whether) to cover GLP-1s, this could shift the cost-benefit analysis in meaningful ways.
So next time you make a mistake at work, you can at least take some comfort knowing that it probably didn’t disrupt a $100 billion-dollar drug market.
In this episode of Phia’s Empowering Plans Podcast, attorneys Nicholas Bonds, Esq. and Bryan M. Dunton, Esq., break down the key Supreme Court rulings issued in June 2025 that have direct implications for self-funded group health plans and their fiduciaries. From decisions impacting coverage mandates, nationwide injunctions, and gender-affirming care, Nick and Bryan explore how these opinions reshape the regulatory landscape and discuss practical takeaways for plan administrators and TPAs. Whether you’re updating plan language or keeping an eye out for compliance risks, this is an episode you can’t afford to skip. Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
By: David Ostrowsky
The message has been well received by the giants of the health insurance industry: it’s time to ease up on prior authorizations.
Whether it’s due to mounting criticism from patients and physicians, political pressure, or last December’s cold-blooded murder of UnitedHealthcare executive Brian Thompson, America’s most prominent insurance carriers—Aetna, Cigna, Kaiser Permanente, UnitedHealthcare among others—have pledged to make a concerted effort to retreat from measures that have long delayed and/or denied medical services, some of which may be life-saving.
According to the Department of Health and Human Services and AHIP, the Washington, D.C.-based national trade association representing the health insurance industry, there are six cornerstone elements of this grand plan to ensure that by the end of 2025, the prior authorization process will be significantly streamlined for both patients and providers:
Though there will be some variation among different states and employers, the adjustments will pertain to both private employer-based and government plans (i.e., Medicare and Medicaid).
While all measures promise to have a profound impact on American patients waiting for a medical procedure or prescription to be greenlighted, the last point—that actual humans with real brains, not robots fueled by artificial intelligence, will be responsible for assessing clinical denials—addresses a very sensitive topic. There have been allegations that many insurers have leveraged A/I to expedite the claim administration process and in doing so have allowed algorithms to be the final arbiter in denying patients care. Of course, such an outcome—not having to foot the bill for high-priced surgeries and procedures—goes a long way towards protecting the bottom line for insurance companies and keeping their shareholders happy. With this new plan, at the very least, even if claims are denied, a human will be able to justify the decision.
As with virtually every process in life, lower-income Americans have been the ones most burdened by the abuses of unregulated prior authorization. Whereas wealthier patients have had the wherewithal to appeal a claim, maybe even hire an advocate or attorney, most Americans simply don’t have the time and financial resources to do so. There have also been many heartbreaking stories chronicling the plight of immigrants who often struggle mightily to comprehend arcane form letters issued by insurers (correspondence that even native-born English speakers often find to be incoherent). Subsequently, many abandon plans to pursue medical care—when one is trying to cobble together an income with multiple low-paying jobs, there’s only so many hours in the day—and/or don’t realize that there is the option to appeal the decision rendered to them. Alas, these changes won’t go into effect for six months, meaning many working-class and middle-class Americans will remain so encumbered for the balance of the year. It also bears mentioning that the aforementioned list of pledges is but a voluntary commitment on behalf of the insurance carriers, though federal officials have made it clear that they will issue new regulations if insurers don’t follow through with their promises.
“We recognize the frustration people often feel about their experience,” remarked Mike Tuffin, the chief executive of AHIP, while adding that by easing the preauthorization policies, “we expect patients will feel less friction and more peace of mind.”
Meanwhile, some healthcare practitioners don’t view the matter as being so one-sided. Though patients on private insurance plans, as well as government plans such as Medicare and Medicaid, have long viewed prior authorization as a nefarious practice causing unnecessary stress leading up to surgery, carriers have countered that prior authorization has actually been critical—perhaps even necessary—for keeping healthcare costs in check as it is the only measure for avoiding excessively expensive and ultimately unneeded procedures, tests, and medications. It also bears mentioning that delays in patients receiving care may not just stem from insurers’ self-serving tactics; even with modern-day technology, many hospitals and providers continue to submit prior authorization correspondence via phone, fax, or even traditional mail.
But, of course, at this hour such beliefs are of the minority opinion. Americans have been furious with prior authorization tactics for a long time. They have spoken and the insurers appear to be listening. Now the question becomes how effective the promised changes will be.
Join The Phia Group’s Corey Crigger and Ron Peck as they discuss some of the things many in our industry seem to be thinking, but are often afraid to say aloud. Does being a good fiduciary mean being a bad guy? Tune in and find out. Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
For a quarter century, Mifepristone, the medication used to block a hormone necessary for pregnancy development, has been widely used throughout America. If anything, over the past few years, since the Supreme Court overturned Roe vs. Wade and permitted individual states to outlaw abortions, the pill, used in conjunction with Misoprostol, has become even more popular among women seeking to terminate their pregnancies. And yet, despite its far-reaching popularity and well-documented efficacy, the Food and Drug Administration (FDA) has maintained stringent restrictions on Mifepristone.
Restrictions that, in the eyes of attorneys general from California, New Jersey, New York, and Massachusetts, have become excessively stringent.
Earlier this month, the quartet of liberal, pro-abortion states filed a citizen petition to lift such restrictions and mandate that the FDA acknowledge the copious amount of scientific research that has invariably found Mifepristone to be safe and effective. Per the filing, the FDA would also not be allowed to alter Mifepristone regulations while the petition is pending.
“The FDA must follow the science and lift these unnecessary barriers that put patients at risk and push providers out of care,” Letitia James, the attorney general of New York, remarked after the petition was filed.
Perhaps the most prominent barrier is the regulatory framework called Risk Evaluation and Mitigation Strategy, or REMS, which the FDA imposed on Mifepristone. REMS is essentially a drug safety program that the FDA uses on medications for which it has considerable safety concerns. Within the context of Mifepristone, REMS requires prescribers to have the necessary qualifications to evaluate whether patients are proper candidates for the drug and ensure that the abortion pill is only dispensed by certified pharmacies or under the auspices of certified prescribers. Also, another requirement under REMS is that patients must sign an agreement acknowledging that they are taking Mifepristone because they decided to terminate their pregnancy.
In the citizen petition, the aforementioned states have advocated for a complete evisceration of the REMS framework, positing that “given mifepristone’s well-established, 25-year safety record, FDA’s current restrictions on mifepristone are no longer justified by science or law.” Furthermore, the states’ filing cites new studies in stating that “mifepristone’s safety has remained stable even as its restrictions have been lessened” and that continuing the restrictions “cannot be squared with the FDA’s lack of REMS programs on drugs that have significantly more risks than mifepristone.” In short, the four states filing the petition believe that these restrictions amount to unnecessary red tape and have discouraged some providers from offering the medication. It should be noted that in addition to the attorneys general of New York, New Jersey, Massachusetts, and California, prominent medical organizations have called for the removal of these restrictions.
The FDA has to respond to the petition within 180 days by granting or denying the request, or saying it needs an extension. In its responses, the agency must document its position, which could be used in lawsuits, including one that the four states could file should their petition be denied.
Surely, Americans’ unfettered access to Mifepristone, a drug that was approved for abortion in America in 2000, remains a contentious issue nationwide. Three Republican-led states (Idaho, Missouri, Kansas) have filed a lawsuit against the FDA challenging the agency’s prior approval of Mifepristone. While the Supreme Court dismissed the case last year, arguing that private parties did not have legal grounding to oppose access to the drug, a Texas federal judge ruled in January that Idaho, Missouri, and Kansas could resume their lawsuit. Meanwhile, the medication continues to be shipped across state lines into states that outlaw abortion, making it more complicated for said states to regulate the practice.
For sponsors of self-insured plans, it bears monitoring how such legal proceedings play out in the ensuing months. Many of their respective participants inclined to terminate their pregnancies may have limited resources and the inability to easily access Mifepristone could have a profound impact on their decisions. And from a legal perspective, there is a very important consideration: as self-insured plans governed by the Employee Retirement Income Security Act (ERISA) are generally exempt from a given state’s insurance laws due to ERISA preemption, plan sponsors—even those with plan participants residing in states with restrictive abortion laws—can typically elect whether or not to cover abortion medication, such as Mifepristone. Alternatively, non-ERISA plans, such as self-insured non-federal governmental plans or church plans, would not have the same flexibility in coverage and must comply with state insurance mandates to the extent they apply to self-insured plans.
By: Bryan M. Dunton, Esq.
In the recently decided case of BlueCross BlueShield of Tennessee v. Nicolopoulos, the Sixth Circuit delivered a clear message to insurers and third-party administrators (TPAs) who also act as ERISA fiduciaries: ERISA’s broad preemption clause does not always provide immunity from state-level regulation. This case underscores the enduring significance of ERISA’s “savings clause,” especially when state regulators act against insurers in their more traditional role.
BlueCross served as both the insurer and ERISA claims administrator for a Tennessee-based employer’s group health plan. The plan excluded coverage for fertility treatments. While Tennessee does not mandate such coverage, New Hampshire law does when it is deemed medically necessary. Here, a New Hampshire-based employee enrolled in the plan that submitted a claim for fertility benefits, which was denied pursuant to the plan’s existing exclusions.
At that point, the plan participant filed a complaint with the New Hampshire Insurance Commissioner. The Commissioner issued a show-cause order, demanding BlueCross explain the denial and threatened regulatory penalties, including a cease-and-desist order and $2,500 per day in fines, which totaled $52,000 over a 21-day period. BlueCross responded by filing a motion in federal court, arguing that the state’s enforcement action interfered with its fiduciary duties under ERISA. Both the district court and the Sixth Circuit disagreed. The Sixth Circuit held that the Commissioner’s action targeted BlueCross in its capacity as an insurer – not that of a fiduciary – falling squarely within the scope of state insurance regulation, which is preserved by ERISA’s “savings clause.”
For third-party administrators and insurers managing self-funded ERISA plans, this case reinforces a key point: if licensed to sell insurance or operate in multiple states, you can be subject to the insurance laws of each state that you conduct business in – even if you’re administering an ERISA plan. The distinction between fiduciary and insurer is not always clear-cut in practice, however. Many TPAs often assert that decisions about benefit denials, network design, and utilization management are made in a fiduciary capacity under ERISA. Often, that is a correct assertion. But Nicolopoulos confirms that when a state regulator enforces a law generally applicable to insurers, particularly those mandating coverage or regulating market conduct, the “savings clause” protects that action from being preempted under ERISA.
The Sixth Circuit relied on the Supreme Court’s precedent in UNUM Lif Ins. Co. v. Ward to bolster its conclusion, which held that laws “directed at” insurers fall outside ERISA’s preemptive reach. Relying on that precedent, the Sixth Circuit notes that state-imposed fines and cease-and-desist orders are classic tools of insurance oversight, not those of fiduciary oversight.
So, what’s the key takeaway for TPAs and insurers? While ERISA preemption for fiduciary duties still plays a dominant role in protecting self-funded plans, this case serves as a cautionary tale that ERISA is not to be equated with blanket immunity from state insurance regulation. Beyond its legal implications, Nicolopoulos reflects a deeper tension in our health care system – the gap that can exist between employer-sponsored health plans and the evolving mandates of coverage by many states. Cases like this one highlight the real-world consequences of that disconnect, resulting in someone being denied access to medically necessary care. As more states expand coverage mandates for fertility treatment, mental health, and gender-affirming care, this ruling reinforces the concept that ERISA preemption is indeed not absolute and there are likely to be more conflicts like those illustrated by this case. This case also highlights the need for understanding where the line is drawn with respect to performing fiduciary duties and ensuring accountability in plan design.
If you have questions about fiduciary duties, or your own group health plan in general, please contact The Phia Group!
By: Kate MacDonald
For decades, Billy Joel has lit up stadiums across the globe, delighting fans with classic hits like “Only the Good Die Young,” “Uptown Girl,” and “Scenes From an Italian Restaurant.” People of all ages can recognize his songs with just a few notes on a piano. A musical icon since his debut in the early 1970s, Joel has won six Grammy Awards and has watched 43 of his songs make it to the Billboard Hot 100 chart.
His most recent song to make it onto the Hot 100 was the somewhat ironically named “Turn the Lights Back On,” his 2024 comeback single. Unfortunately, it might be sometime until his fans see him perform under stage lights again.
Joel recently announced that he’s suffering from normal pressure hydrocephalus (NPH), a rare brain disorder, and decided to cancel the rest of the shows on his 2025-2026 tour. The legendary singer-songwriter posted a statement to his social media accounts, explaining that the condition has taken a toll on his hearing, vision, and balance, making stage performances dangerous, and was resting, per his doctors’ advice. The announcement also explained that treatment will include specific physical therapy for the condition, and that the singer is aiming to make it back to the stage.
In March, Joel had to postpone several concerts due to a condition that required surgery and follow-up physical therapy. No further details were given, and it’s unknown whether this was related to NPH.
NPH occurs when cerebrospinal fluid flows in from around the brain and spinal cord and amasses inside the skull, which disrupts brain function. Symptoms include an unsteady gait, memory and thought processing problems, balance trouble, and bladder control difficulty.
While this is a rare disorder (0.2 percent of people from 70 to 80 suffer from NPH, and 6 percent of individuals over 80 will experience this condition), one’s sex, race, or ethnicity do not factor into the equation. Thus far, researchers are unsure if it passes down through genes.
Diagnoses for NPH can happen via CAT scan or MRI, where doctors can spot the cerebrospinal fluid buildup, but this can most definitively be confirmed with a spinal tap. When caught early, NPH is usually a treatable condition.
However, that brings up another issue, one that plagues many Americans no matter the diagnosis: NPH is often misdiagnosed. Given the symptoms (walking problems, incontinence, memory issues), NPH can be overlooked, dismissed as simply normal signs of aging.
For sponsors of self-insured plans, it is crucial to consider all facets of plan document language when considering possible diagnoses during the plan drafting process. For example, if a participant is experiencing new symptoms but they are brushed off because of their advanced age or because their situation is deemed a common ailment, they may want to examine their plan language for a “second opinion” provision, which may not be included in benefit language, but instead potentially nestled in the utilization management section. After all, as the Johns Hopkins Armstrong Institute Center for Diagnostic Excellence noted, approximately 12 million Americans are misdiagnosed every year, which results in harm to about four million.
Otherwise, the plan participant should be aware that even if they are diagnosed with a rare condition, the course of treatment may be somewhat commonplace as is the case with Billy Joel. Covered individuals should consult with their physicians about treatments, review their plan documents, and discuss next steps. For example, where NPH is concerned, potential surgery and physical therapy are common treatments (and typically covered by plans).
Catching many illnesses and ailments early can mean the difference between life and death, or at least a shorter course of treatment and a longer road ahead. While Billy Joel convalesces, he has fans across the globe sending him well wishes. For the average plan participant, although they may have more home-grown support, they can also count on the backing of strong self-funded plan language in their corner.
On the latest installment of the Empowering Plans podcast series, join attorneys Jon Jablon and Kendall Jackson as they discuss the integration of AI into the self-funded industry. From HIPAA considerations to current case law, this episode explores the impact of AI on health plans and TPAs thus far. It is an episode you can’t afford to miss! Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
By: Jon Jablon, Esq.
When it comes to self-funded health plans, fiduciary duties often tend to lurk in the background – acknowledged and respected, but not always fully understood. The recent Sixth Circuit decision in Tiara Yachts, Inc. v. Blue Cross Blue Shield of Michigan brings those duties into sharp focus, offering a valuable lesson for TPAs, brokers, and plan sponsors.
Tiara Yachts hired BCBSM to administer claims for its self-funded health plan. Tiara alleged that BCBSM systematically misapplied pricing rules when processing out-of-network, out-of-state claims. Specifically, BCBSM was supposed to apply negotiated Host Blue rates (i.e., discounted rates established by the Blue Cross entity in the provider’s region) but instead used what they internally called a “flip logic” workaround. Specifically, when the provider wasn’t in-network with the local Blue plan, BCBSM would treat the provider as out-of-network entirely – so instead of paying the negotiated Host Blue rate, BCBSM would pay the full billed charge. In effect, claims that should have been reimbursed at negotiated rates were paid at much higher amounts, without any clear benefit to the plan or its members, and allegedly in violation of the negotiated rate promises that BCBSM had made to their clients such as Tiara.
And here’s where it gets good.
BCBSM applied a “Shared Savings Program” to recover those overpayments, designed to correct the BCBSM-created errors in pricing and recover the very funds that BCBSM had systemically overpaid. Despite the nature of this program as correcting BCBSM’s own mistakes, BCBSM charged a fee of 30% of the amounts recovered. They created the mess, and sold their client the mop.
The court’s central question was whether BCBSM acted as a fiduciary under ERISA. The Sixth Circuit said yes, and not at all subtly. In line with ERISA’s longstanding “functional fiduciary” approach, the court held that BCBSM’s authority over claim payments, and its discretion to compensate itself from plan assets, was more than enough to establish fiduciary status. Though the court noted that BCBSM was aware of the “flip logic” errors rather than necessarily overpaying intentionally in order to create a revenue opportunity, the court also reasoned that the fact that the alleged errors were systemic didn’t absolve them; if anything, the scope of the errors strengthens the fiduciary argument. Charging a fee to rectify the mistake is a separate, but significant issue, and it is central to the alleged breach, and it will carry significant weight when the case returns to the trial court.
This case underscores that fiduciary status isn’t conferred by contract or by title, but by action. There are two central questions: whether BCBSM was a fiduciary, and if so, whether it violated its duty. The deciding factor for whether fiduciary duties exist is whether the TPA had discretion over plan assets, and the question of whether the duty was breached hinges on whether the TPA used that discretion to enrich itself. The implication here is that when the same entity both erroneously pays and reclaims plan funds, any appearance of self-dealing is magnified, particularly when the TPA is charging the plan to rectify its own systemic errors, and when there’s no independent check on the reasonableness of the fee involved.
This is where a smart separation of functions becomes important. This case underscores not just the importance of understanding fiduciary boundaries, but also the prudence of outsourcing high-risk functions like third-party liability and overpayment recovery. Doing those things in-house without guardrails creates a dual risk: both the appearance of profiting from your own errors, and actual fiduciary exposure if the math doesn’t hold up. Using an independent vendor both adds a layer of auditability and removes any suggestion that the fox is guarding the henhouse.
Tiara Yachts serves as a compelling reminder that fiduciary duties aren’t theoretical. They’re real, enforceable, and they have some serious teeth when warranted. For anyone handling plan assets – especially in contexts involving provider reimbursements or overpayment recovery – it’s crucial to focus on transparency, documentation, and often, outsourcing.
As a general lesson from this case, as a TPA, if your fees to fix your own errors start to feel more lucrative than your actual claims administration, it might be time to give that model a second look (or at least run it by legal before a federal court does).
If you have questions about your own program, a vendor’s program, or even just fiduciary duties in general, please contact The Phia Group!
For fiduciaries of health and retirement plans, things have gotten more complicated.
In what has been a very busy spring for the Supreme Court, it recently heard the case of Cunningham et. al. v. Cornell University, in which the plaintiffs, representing over 30,000 current and former employees enrolled in Cornell University’s 403(b) retirement plans (which contained approximately $3.4 billion in net assets), claimed that the plan fiduciaries violated ERISA by neglecting to remove low performing investments and engaging in prohibited transactions, namely paying excessive recordkeeping fees to retain two recordkeepers. While most of these claims had been dismissed by lower courts—the Second Circuit interpreted ERISA to mean plaintiffs were required to show that services were unnecessary or fees were unreasonable to state a claim—the plaintiffs ultimately prevailed as the high court, in a unanimous 9-0 ruling delivered by Justice Sotomayor, agreed to reverse the lower courts’ rulings.
Essentially, the Supreme Court’s decision will empower millions of employees belonging to retirement and health benefit plans nationwide to file claims by alleging improper transactions without having to prove additional elements such as harm or unreasonable conduct in the pleading stage. More specifically, they will only have to allege three things—the fiduciary caused the plan to engage in a transaction; the fiduciary should have known the transaction involved furnishing of goods and services; and the transaction was between a plan and party of interest—and no longer have to defeat the affirmative defense that reasonable compensation is necessary, a pleading standard that is very hard to meet. In short, it will be easier for them to survive a motion to dismiss their respective cases. Meanwhile, administrators of private health and retirement plans will now be under greater scrutiny to fulfill their fiduciary obligations to plan participants and thus be accountable for demonstrating compliance with rules regarding prohibited transactions, documenting necessity of services procured, and evaluating reasonableness of fees.
But, looking at this case from a different perspective, it’s interesting to examine who exactly are the plan participants in the case of Cunningham et. al. v. Cornell University. As previously mentioned, tens of thousands of Cornell employees—both past and present—took their case to the Supreme Court because, quite simply, they felt as though they were getting shortchanged by the stewards of their retirement plans. While some of these employees were extremely well-compensated (i.e., the president, the provost, and the chancellor), the majority of them were not. Whether they were janitorial workers, lab technicians, administrators, or nursing assistants who toiled for years to keep the university up and running, every dollar in their respective retirement accounts really mattered and understandably they want to know how those dollars are being spent. And in the world of healthcare benefits, health plan members stand to enjoy greater transparency when it comes to being aware of not just fees specifically for health services, but also those for brokers, vendors, pharmacy benefit managers (PBMs), and TPAs among other entities. After all, there are so many fees a health plan pays and participants have a vested interest in ensuring they are reasonable and not duplicative.
That is why this case really matters, because regardless of the industry involved, plan administrators are safeguarding the hard-earned retirement funds (and in many cases, assets used to fund healthcare services) of real people. And now they are going to be held more accountable for properly doing so while acting in a transparent manner as the risk of encountering lawsuits brought on by plan members for allegedly high fees will be heightened.
Join attorneys Bryan Dunton and Cindy Merrell as they explore President Trump’s latest moves to address the rising cost of prescription drugs. Cindy and Bryan discuss potential impacts of recent Executive Orders and proposed tariffs. Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
Review hundreds of health benefit plans, and it’s unlikely you’ll find one that is fully compliant with the Mental Health Parity and Addiction Equity Act (MHPAEA). It’s not that these plans are poorly constructed, it’s just that satisfying compliance requirements is incredibly challenging. Non-quantitative treatment limitations (NQTLs) present an incredibly challenging regulatory hurdle, amid an ever-shifting governing landscape. Given the enormous penalties that plans will incur for eschewing compliance, NQTL comparative analysis testing is a lifesaver. Join The Phia Group’s mental health parity professionals and learn from unrivaled experts as they share their experiences and learnings with you, right in the heart of Mental Health Awareness Month. We break down the latest regulations and discuss cost containment options, not to mention the social impact of these issues. Plus, we explored the latest breaking development: President Trump’s executive order to cap all prescription drug prices, and what this could mean for your plan. This is one webinar you truly cannot afford to miss.
Click Here to View Our Full Webinar To obtain a copy of our webinar slides, please reach out to [email protected].
In this episode, we unpack the Supreme Court’s unanimous decision in Cunningham v. Cornell University — a landmark ERISA case with major implications for retirement and health plan fiduciaries. We explain the facts behind the case, what “prohibited transactions” really mean, and why the Court's ruling on affirmative defenses matters. If your health plan pays fees to TPAs, PBMs, IDR vendors, or brokers, this episode is for you. Click here to check out the podcast! (Make sure you subscribe to our YouTube and Apple Podcasts Channels!)
The numbers are simply too grim to ignore.
Not even a month ago, on April 4, the results of the West Health and Gallup poll survey, conducted from mid-November to late December last year, were published, revealing that quality, affordable healthcare eludes 35 percent of Americans (representing some 91 million adults), a four-point jump from 2023 and the highest mark since 2021. Meanwhile, approximately 29 million Americans, or 11% of those surveyed, reported that they lacked the means to afford medication and care as recently as over the past three months. Just as unnerving—but most certainly not surprising—is that the disheartening trend has been most prominent among lower-income individuals (those who belong to families earning less than $24,000 per year) as well as Hispanic and Black Americans; conversely, there has been negligible change in this regard among mid- to high-income earners and whites. Hence, one reason why there is the ever-widening healthcare social disparity plaguing our nation.
Not that it provides any sense of relief to the millions having to choose between paying their electric bills or backlog of medical co-pays, but in its report, West Health and Gallup provide some useful context by rationalizing that there are essentially three categories into which American healthcare consumers can be classified:
In a nutshell, the West Health and Gallup report concluded that, based on these classifications, the gap between those Americans who can access and afford quality healthcare, essentially half the nation, and those who lack the basic resources to do so – the other half of our country’s population – has widened significantly. Of course, lower-earning Americans have always struggled to afford healthcare but the relentless forces of consumer and medical inflation, lingering drug shortages, and escalating rates of Medicaid disenrollment thanks to the expiration of the continuous enrollment provision and significant cutbacks to Children’s Health Insurance Program (CHIP) enrollment have pushed so many financially insecure individuals to the brink. In contrast, these recent trends have had negligible adverse effects, if any, on so many Americans who have the means to afford robust health services.
Socio-economic concerns aside, the erosion of so many Americans’ wherewithal to consume healthcare presents grave practical implications for the country. Per recent research from West Health and Gallup, American adults borrowed nearly $74 billion last year to pay off healthcare-related debts while close to 60% of U.S. adults reported being “somewhat” or “very” concerned about taking on debt following a major medical event. Given the current economic climate in which interest rates remain stubbornly high, taking out significant bank loans to pay down debt does not augur well for the average American household’s financial welfare. If Americans have to invest so much into just one facet of their lives, albeit an extremely important one, it naturally means there’s less funds available for higher education, home improvements, and travel and leisure among other services that comprise a strong national economy. Put another way, the increasing percentage of what West Health and Gallup refer to as “Cost Desperate Americans” serves as further indisputable proof that the financial strain and subsequent high levels of stress experienced by healthcare consumers in the U.S. – including those who are not just underinsured but feel compelled to remain in an undesirable job solely for the health benefits -- continues to be a dire nationwide problem.
While West Health and Gallup poll results and accompanying report thoroughly addressed healthcare access and affordability, there was scant mention of another vital part of the equation: health insurance access and affordability. Which, is of course, a discussion for another blog.