Recent Regulatory Changes and Litigation Trends May Impact Benefits Managers

With the growing number of new federal and state regulatory mandates and judicial decisions impacting benefits, human resource managers need to stay on top of compliance updates in the immediate horizon.

Among the developments worth noting:

• Rising claims for breach of ERISA plan fiduciary duties. Large self-funded employers are facing litigation over the mismanagement of plan assets in health and welfare plans which is a common occurrence in retirement plans. Several lawsuits have claimed that plan sponsors have breached their fiduciary duty of loyalty as they are paying excessive fees for generic and brand medications and for the services of pharmacy benefits managers (PBM). To avoid such claims, plan sponsors should thoroughly review their PBM and TPA contracts and regularly review their vendors’ fees to ensure pricing is in line with the market.
• Court suspends enforcement of final  ACA Section 1557. In Tennessee v. Becerra, the state challenged the constitutionality of nondiscrimination protections for providing gender-affirming care or coverage. With a national injunction now in place, various related provisions have been suspended, with final disposition hinging on future judicial developments.
• New HIPAA privacy reproductive health rights. SCOTUS’ overturn of Roe v. Wade led to the issuance of new HIPAA protections that extend to health reproductive rights. HIPAA-covered group health plans (medical, pharmacy, HRAs and health FSAs, etc.) must update their policies and procedures, HIPAA business associate agreements, train their workforce and adopt the use of attestations in accordance with the new health reproductive rights no later than Dec. 23, 2024.Covered entities must also distribute new HIPAA notices to covered participants no later than by Feb. 16, 2026. Note that the state of Texas recently filed suit against HHS to halt the implementation of the new HIPAA health reproductive rights. It is important to monitor this case to determine if a national injunction will delay the implementation of these rules.

Also noteworthy are some new state-level legislative mandates:

• Washington has tightened rules around pharmacy benefit managers (PBMs) and insurance carriers contracting with them. The rule restricts retaliation of PBMs against pharmacies, by restricting PBMs ability to exclude pharmacies from their networks, reimbursing pharmacies amounts less what the pharmacy paid for a medication, and creating an appeal process before the WA Office of the Insurance Commissioner when a pharmacy believes the payment made by a PBM is unfair, the Commissioners decision is binding. These new rules are designed to improve access to pharmacies, medications and to control the cost of prescription drugs in the state. Effective Jan. 1, 2026, PBMs in the state must comply with various regulations concerning reimbursement to pharmacies and consumer out-of-pocket costs for prescription drugs. While the new appeals process becomes effective on July 1,2027. Note that self-insured plans will be offered the option of opting in to adopt the new protocols impacting PBMs and their reimbursement practices. These changes are anticipated to increase the cost of insurance premiums in WA as these new regulations will minimize the profits insurance carriers make when furnishing prescription drugs through their PBMs to covered members.
• Oregon has adopted the new rule for Well Women Preventative requirements, in line with federal guidelines. The 13 services, including breast cancer and urinary incontinence screening, must be covered at zero cost sharing. Impact on plans is minimal.
• Alaska has added a Paid Sick Leave Act that will take effect July 1 of 2025.

Submitted by Liliana Salazar, Esq., Chief Compliance Officer
for the Western Region of global insurance brokerage HUB International Limited