How the first ‘fiduciary duty’ lawsuit for health benefits affects employers and employees

About a year ago, we wrote how the Consolidated Appropriations Act of 2021 (CAA) would soon begin holding employers accountable for upholding their fiduciary responsibility of evaluating and managing employee health benefits to ensure costs are optimized (and scrutinized). There was talk then that the CAA would even allow employees to sue employers if they didn’t effectively manage their health benefits.

That inevitable class action lawsuit was filed earlier this year, alleging that Johnson & Johnson mismanaged drug benefits for employees. The lawsuit states that no prudent fiduciary — by law, someone who manages another person’s money for their benefit — “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.”

Some experts believe this is just the first of many lawsuits that will be the catalyst for revamping the approach to employer-sponsored benefits, and it will ultimately have a positive effect on the health care industry. Change is certainly needed, as the average family premium has increased at a 14% clip year over year for the past two decades.

What has changed for employers?

Employers need to ask themselves what their main obligation is as the fiduciary. It shouldn’t be to simply and minimally meet the requirements of a new law by going through the bureaucratic motions for the sake of being in compliance. It should be about doing what’s truly right by their employees.

The potential impact of this shift is vast. Instead of health care costs steadily rising every year and employees anxiously awaiting the dreaded open enrollment period, we could have a nation of benefits managers working to provide high-quality, accessible care at more affordable rates.

There are real steps to be taken. By far the most important is to enlist a trusted advisor in the form of a benefits navigator that can help employers be fiduciary-compliant. There are brokers, consultants and third-party administrators to deal with and far too much complexity for it to be a reasonable expectation that employers step up and properly handle the situation.

Adding a benefits navigator to a health plan helps employees find low-cost, high-quality options for both providers and prescriptions. A navigation company also helps rectify outstanding medical bills and guides employees through the process of applying for hospital financial assistance, which is available to a larger chunk of the population than people may think.

It’s also important to know how much benefit consultants and brokers are being paid, and by whom. Employers should regularly check the market to make sure benefit packages are competitive through an annual RFP for both medical and pharmacy coverage.

Put simply, if employers know the current health benefits plan is not working efficiently or looking out for their employees’ best interests, make a change. Getting people on board who will mitigate costs, advise employees and seamlessly improve the entire benefits experience is a great way to act as a fiduciary.

Other programs like fraud, waste and abuse oversight of health insurance plans act as risk management tools. These are the types of services that can be implemented immediately to ensure health insurance premiums are being spent effectively.

Management teams should also have regular meetings to review (anonymized) health plan data to clearly understand how the plan is performing and identify areas for improvement. And make sure to follow up on these deliverables. Take minutes and sign a charter as the fiduciaries with an obligation as part of this process.

What changed for employees?

While the main responsibility of satisfying the role of fiduciary falls on the employer, there are things employees should consider. For one, are they satisfied with their benefits?

Employees shouldn’t feel left alone to fend for themselves when it comes to understanding and utilizing their benefits package. Employers need to offer assistance and programs to support employee health and wellness, like navigation services. But it’s also incumbent on the employee to take advantage of these services.

This may not be what employees who are already paying high premiums, copays and other out-of-pocket costs want to hear, but lowering health care spend also requires making sound decisions. That means being willing to choose generic drugs over a clinical-equivalent name brand to offset costs. It means using a free-standing imaging center versus getting an MRI at a hospital. There are many easy-to-use steps that can greatly reduce the cost of care with zero impact on quality.

Related: Hidden crisis: Millions with employer insurance delay care due to high costs

It also means taking a look at their own habits and practices. Have they done anything to contribute to the rising costs like stockpiling medication or knowingly seeing a high-cost provider when they were aware of a lower-cost, equivalent alternative?

There’s a lot of blame to go around concerning the current state of the American health care industry. We didn’t get here overnight and we won’t fix it tomorrow. But employers being cognizant of and fulfilling their fiduciary obligations and employees increasing their health engagement are big steps in the right direction.

Michael Waterbury is CEO of Goodroot, a community of companies reinventing health care one system at a time. Steve Palma is president of medical cost solutions at Goodroot.