More than half of all Americans receive health insurance through an employer, but increasing health care prices, consolidation, and administrative complexities are driving up health plan premiums for employers and employees alike.
The Employee Retirement Income Security Act of 1974 (ERISA) is the primary law governing most private employer-sponsored health insurance plans and, at first blush, many aspects of ERISA make it a natural fit for controlling health plan spending. Among other obligations, ERISA requires that health plan fiduciaries spend plan assets wisely, and bars health plans from paying more than reasonable compensation to service providers, including their pharmacy benefit managers (PBMs) and third-party administrators (TPAs).
ERISA has long imposed these requirements, but the law is drawing new scrutiny as cost pressures increase and employers gain access to more information about what they are actually paying—and to whom. This week, Georgetown’s Center on Health Insurance Reforms published their latest report, “Is ERISA up for the job? Improving Employer-Sponsored Health Insurance Affordability?” In this brief, with support from the Peterson Center on Healthcare, CHIR faculty examine ERISA and answer three key questions:
- How can ERISA make the health care system more transparent for employers?
- How can ERISA litigation drive better health plan stewardship?
- How can the Department of Labor (DOL) promote affordability under ERISA?
For each of these questions, CHIR explores the state of the law and what it can accomplish today and identifies opportunities to expand ERISA’s impact. CHIR concludes by identifying three policy options that could form the basis of a cost containment reform agenda for ERISA:
- Policymakers could clarify when ERISA’s fiduciary duties apply to PBMs and TPAs and identify examples of compensation schemes or other contracting and business practices that may violate these duties.
- Congress could amend ERISA to directly regulate more PBM, TPA, and other service provider conduct, both to enhance oversight over its transparency requirements and to prohibit or limit anticompetitive contracting behavior and other abusive business practices.
- Congress could provide the DOL with resources and authority to more actively support employers in their role as health care purchasers.
The full brief and executive summary are available to read and download here.