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Mark Cuban’s big warning for employers

https://www.beckerspayer.com/workforce/mark-cubans-big-warning-for-employers.html

Mark Cuban is issuing a big warning to self-insured employers: If your company receives pharmacy rebates through employee benefits, prepare for an eventual lawsuit.

“It’s not a question of if, it’s a question of when,” he wrote on X on July 22. “The inevitable class action suit will dwarf the tobacco settlements.”

Mr. Cuban’s comments come as large employers are beginning to face lawsuits from their workers over claims of mismanaging health and pharmaceutical benefits and violating their fiduciary duties under the Employee Retirement Income Security Act. 

ERISA requires self-funded employers acting as health plan fiduciaries to make an effort to find the lowest costs for healthcare services. In 2021, the Consolidated Appropriations Act amended ERISA to create new requirements for consultants and benefits brokers to disclose to employers any direct or indirect compensation they receive. Price transparency requirements enacted the same year also means that employers have gained more tools and are under more pressure to fulfill their obligations to employees.

“But unlike employers who hold a fiduciary responsibility, consultants and brokers do not hold a fiduciary relationship with employees, thus there is no obligation to prioritize the employer’s interest over their own,” researchers wrote in an AJMC study published July 19, and cited by Mr. Cuban.

“In light of recent legal action, employers may wish to better understand the financial incentives of their consultants and brokers when accepting their recommendations for rebate contracting strategies and pharmacy benefit design.”

In the most recent example, Wells Fargo was sued by employees in July for allegedly paying inflated prices to its contracted pharmacy benefits manager, Express Scripts. 

A February lawsuit against Johnson & Johnson accuses the company of paying inflated costs for generic prescription drugs designated as specialty medications to Express Scripts, thereby harming employees through higher costs, premiums, deductibles, copays and lower or limited wage growth. J&J’s employee health plan paid more than $10,000 for a 90-day prescription of a generic drug used to treat multiple sclerosis, which is available for as little as $40 without insurance at retail pharmacies, according to the suit.

“No prudent fiduciary would agree to make its plan and beneficiaries pay a price that is two-hundred-and-fifty times higher than the price available to any individual who just walks into a pharmacy and pays out-of-pocket,” the plaintiff’s attorneys wrote.

With employers increasingly feeling the pressure, some have sued their health plan and third-party administrators directly in an effort to access complete medical claims data. 

In June 2023, Kraft Heinz alleged Aetna used its role as third-party health plan administrator “to enrich itself to Kraft Heinz’s detriment” through undisclosed fees and processing medical and dental claims without human review. The food manufacturer voluntarily dismissed the lawsuit in December and moved it to private arbitration.

But employers can’t always point the finger at third-party administrators, Christin Deacon, an attorney and principal owner at VerSan Consulting, previously told Becker’s. For example, if an employer signed a bad contract that allowed egregious behavior, the TPA could turn around and ask why the employer didn’t act upon that. 

“I think that definitely plays into the fear factor of employers not being more aggressive,” Ms. Deacon said. “There’s plenty out there that are going to get on the bandwagon of being more aggressive with their carriers. Nobody wants to be the first, but everybody wants to be a fast follower.”

“I think the first step is get a handle on all of your existing contracts and relationships and ask for your claims data. Document everything you’re doing to try to be a good fiduciary to the plan,” Ms. Deacon said. “Get your contracts, read your contracts, get your data and put processes in place that are going to help you protect yourself again from that fiduciary liability.”

Filed under: General Problems