Employers, PBMs face heightened regulatory scrutiny under new federal laws

By Alan Goforth – The regulatory environment for pharmacy benefits is changing significantly at both federal and state levels. For benefits advisors, it is imperative to distinguish between the requirements that new federal laws impose, the obligations that emerging state regulations introduce and the changing role of ERISA protections for plan sponsors, according to the first-quarter market report from RxBenefits. Federal reforms, most notably the Consolidated Appropriations Act of 2026, impose direct, enforceable mandates directly on pharmacy benefit managers. Read Full Article... ^{_{(Subscription required)}}

HVBA Article Summary

1. Federal Mandates on PBMs and Employers: Recent federal legislation, particularly the Consolidated Appropriations Act of 2026, has introduced strict requirements for pharmacy benefit managers (PBMs), such as mandatory rebate pass-throughs and limits on administrative fees. Employers who sponsor health plans now face increased fiduciary duties, requiring them to act in the best interests of plan participants and maintain thorough documentation. These changes mean both PBMs and employers must ensure their arrangements are transparent and compliant with federal standards.

2. Dual Compliance and Evolving ERISA Protections: The traditional ERISA preemption that shielded employers from certain state regulations is becoming less reliable as both federal and state oversight intensifies. Employers and their advisors must now navigate compliance with both sets of laws, which may sometimes overlap or conflict. This dual compliance environment increases the complexity of managing pharmacy benefits and places greater responsibility on benefits advisors to keep clients informed and prepared.

3. State-Level Reforms and Advisor Action Steps: Many states are enacting their own laws to increase transparency and control pharmacy costs, including requirements for drug reimbursement methods and minimum dispensing fees. These state mandates add another layer of regulation for employers and PBMs to address. The article highlights that benefits advisors should proactively audit PBM contracts, benchmark performance, educate clients about transparent pricing, and collaborate with independent oversight organizations to ensure optimal and compliant plan design.

The Supreme Court won't take up IRA cases

By Nicole DeFeudis – The Supreme Court says it won’t wade into the pharma industry’s yearslong legal battle over Medicare drug price negotiations. The justices declined to review multiple cases brought by AstraZeneca, Johnson & Johnson, Bristol Myers Squibb, Novo Nordisk, Novartis and Boehringer Ingelheim. Drugmakers have been fighting IRA negotiations in court for years. During the first round of negotiations, which began in 2023, the government secured discounts of up to 79% off the list price of 10 blockbuster drugs. Read Full Article... ^{_{(Subscription required)}}

HVBA Article Summary

1. Supreme Court Declines to Hear Drugmaker Challenges to Medicare Negotiations: Drugmakers challenged the Medicare drug price negotiation process on constitutional and statutory grounds, arguing that it may restrict free speech and due process rights. Some companies, including Novo Nordisk, also disputed CMS’ interpretation of the Inflation Reduction Act, particularly regarding the agency’s definition of “qualifying single source drugs.” The Supreme Court’s decision not to hear the cases leaves lower-court rulings in place and postpones broader legal resolution of the disputes.

2. Lower Courts Have Consistently Ruled Against Drugmakers: Legal experts noted that the cases lacked the conflicting lower-court decisions that often prompt Supreme Court review. So far, pharmaceutical companies have lost every challenge where courts have ruled on the merits of the Medicare negotiation program. The absence of judicial disagreement across lower courts may have contributed to the Supreme Court declining to intervene at this stage.

3. Additional Legal Challenges to Medicare Negotiations Continue: Several lawsuits tied to the Medicare drug negotiation process remain active in lower courts and could eventually reach the Supreme Court in the future. AbbVie recently challenged CMS over the selection of Botox for the next negotiation round, while cases involving Merck & Co., Teva Pharmaceutical Industries, and Pharmaceutical Research and Manufacturers of America are still pending. Meanwhile, CMS continues expanding negotiations to additional drugs, including products from Eli Lilly and Company and Gilead Sciences.

AI Enters ERISA’s Document-Heavy World, Promising Benefits and Revealing Risks

By James Van Bramer – Few can dispute the omnipresence of artificial intelligence. In a podcast interview several months ago, highly respected finance journalist Andrew Ross Sorkin said he completed a simple legal task using AI that would have cost him a few hundred dollars in fees if he had sent it to his lawyer for review. Sometimes, however, the use of AI does not go as smoothly. Sullivan & Cromwell LLP recently admitted to and apologized for AI hallucinations included in a motion the firm filed in an April bankruptcy filing. Read Full Article...

HVBA Article Summary

1. AI’s Growing Role in ERISA Legal Work: Artificial intelligence is increasingly being used in the management and review of retirement and benefits plan documents, offering efficiencies in tasks such as document review, claim analysis, and litigation discovery. Legal professionals note that AI can help plan sponsors and attorneys process large volumes of information more quickly and accurately. However, experts caution that the technology’s benefits must be balanced with careful oversight to avoid errors and ensure compliance with fiduciary duties.

2. Fiduciary Responsibility and Prudence Remain Critical: Despite AI’s potential to streamline legal processes, ERISA requires that fiduciaries exercise prudence and loyalty in their decision-making. Legal experts emphasize that plan sponsors and fiduciaries cannot delegate their responsibilities entirely to AI systems and must continue to monitor and evaluate the recommendations and outputs generated by these tools. Courts are likely to scrutinize not just the decisions made, but the processes followed, making documentation and oversight essential when incorporating AI into plan administration.

3. Risks Include Hallucinations, Cybersecurity, and Bias: While AI can improve efficiency, it also introduces risks such as generating inaccurate or fictional information (hallucinations), potential breaches of confidentiality, and algorithmic bias. The sensitive nature of ERISA plan data, including financial and medical information, heightens the need for robust cybersecurity and privacy safeguards. Legal professionals advise that contracts with service providers using AI should be carefully reviewed, and that ongoing vigilance is necessary as the technology and its applications continue to evolve.

Cyber crackdown could cost hospitals billions

By Tina Reed – Hospitals are bracing for a sweeping rewrite of federal health privacy rules that could result in more penalties for cybersecurity breaches and add billions of dollars in costs. Why it matters: Spurred by the massive Change Healthcare hack in 2024, the changes reflect a growing belief that at least some health care breaches are preventable and that hospitals should be required to meet baseline security standards. The big picture: Hospitals and other health providers are increasingly fighting cyberattacks on outdated systems that put valuable patient data at risk and threaten serious disruptions of care. Read Full Article...

HVBA Article Summary

1. Major Regulatory Overhaul: The Biden administration is set to finalize the most significant update to HIPAA privacy and security rules since 2013. This overhaul is motivated by recent high-profile cyberattacks, such as the Change Healthcare hack, and aims to establish baseline cybersecurity standards for health care organizations. The new rules would require measures like multi-factor authentication, encryption, and rapid system restoration procedures.

2. Financial and Operational Impact: Hospitals are expected to face substantial costs, with compliance estimated at $9 billion in the first year and $6 billion annually thereafter. The proposed regulations would also expand the scope of what constitutes a HIPAA violation and increase potential civil penalties to $68,000 per violation. Many health care organizations and industry groups argue that the financial burden and tight implementation timelines could be especially challenging for smaller providers.

3. Debate Over Feasibility and Effectiveness: Critics of the proposal, including industry leaders and cybersecurity advisers, contend that some requirements—such as restoring systems within 72 hours—are impractical, particularly in the face of sophisticated attacks by foreign actors. However, regulators and cybersecurity experts maintain that most breaches result from preventable security lapses rather than advanced threats. The debate continues over whether the new rules strike the right balance between improving security and imposing manageable demands on health care organizations.

ACA exchange enrollment likely to decline by at least 17% this year: KFF

By Paige Minemyer – Enrollment in Affordable Care Act marketplace plans could decline to 17.5 million people this year, according to a new KFF analysis. Researchers at KFF analyzed data from Wakely Consulting Group, which tracks the exchanges, and found that 86% of people enrolled in an individual market plan as of January 2026 paid their first month's premium. The consultants estimate that enrollment in the exchanges could decrease by 17% to 26% over the course of 2026, accounting for unpaid premiums, mid-year attrition and other impacts. Based on that projection, KFF's analysts estimate that 4.8 million could drop out of their exchange plans compared to 2025. Read Full Article...

HVBA Article Summary

1. Significant Decline in ACA Enrollment Expected: The KFF analysis projects a notable drop in ACA marketplace enrollment for 2026, with estimates ranging from 17% to 26% fewer enrollees compared to the previous year. This would represent the largest single-year decrease since the exchanges were established. The decline is attributed to factors such as unpaid premiums, mid-year attrition, and the expiration of enhanced premium tax credits.

2. Premium Increases and Plan Shifts Impact Coverage: Average premiums for marketplace plans rose by 58% between 2025 and 2026, prompting many consumers to switch to lower-cost bronze tier plans, which have higher deductibles. As a result, the share of people in bronze plans increased from 30% to 40%, and average deductibles reached a record high. These cost pressures have led to a greater number of individuals, especially those above the subsidy threshold, dropping their coverage.

3. Demographic and State-Level Variations in Enrollment Losses: The largest enrollment declines were observed among individuals aged 18 to 34 and those earning above 400% of the federal poverty level, who are less likely to qualify for subsidies. Enrollment fell in 41 states, with North Carolina experiencing the steepest drop at 22%. The full demographic impact of these changes may not be clear for some time, as federal data will only provide aggregate figures and more detailed information may be delayed.

How to tackle the chronic condition trifecta

By Paula Sheehan – Cardiovascular disease, obesity and diabetes form a powerful — and costly — trifecta of chronic conditions that continue to drive long-term health plan expenses and quietly erode workforce productivity. As many as 51.4% of adults — representing roughly 130 million people — report multiple chronic conditions, underscoring the scale and urgency of this issue. These conditions rarely occur in isolation, are deeply interconnected and often compound one another, creating a cycle of escalating health risks, diminished quality of life and rising employer health care costs. Read Full Article... ^{_{(Subscription required)}}

HVBA Article Summary

1. Integrated Approach Needed: The article highlights that traditional, fragmented approaches to chronic disease management are insufficient for addressing the interconnected nature of cardiovascular disease, obesity, and diabetes. Employers are encouraged to adopt integrated care models that coordinate treatment and support for multiple conditions simultaneously. Such strategies can streamline care, reduce confusion for employees, and improve overall health outcomes.

2. Prevention and Engagement Are Critical: Employers are advised to shift their benefit strategies toward prevention, early intervention, and meaningful employee engagement. This includes elevating the role of primary care, leveraging data to identify high-risk populations, and embedding mental health resources within chronic condition programs. Personalized outreach and culturally tailored communication are emphasized as effective ways to drive sustained behavior change.

3. Holistic Solutions Yield Better Results: Organizations that implement holistic, evidence-based benefit designs—covering nutrition counseling, health coaching, and wraparound services—are seeing improvements in chronic condition management and reductions in healthcare costs. The article cautions against overreliance on medications like GLP-1s and stresses the importance of treating obesity as a chronic disease requiring long-term management. Virtual care platforms and targeted coaching are cited as promising tools for improving employee health and plan sustainability.

Rethinking the ways employers manage benefits risk

By Todd Martin – Employers who are waiting for benefits costs to stabilize may be misunderstanding what is happening in the market. Although year-over-year premium increases may appear to level out, the underlying risk is becoming more concentrated and less predictable. Claims variability, workforce shifts and a fragmented vendor landscape are creating volatility that is harder to detect and even more difficult to manage. This changing risk profile calls for a different mindset. Read Full Article...

HVBA Article Summary

1. Continuous Risk Management Needed: The article argues that the traditional annual benefits planning cycle is no longer sufficient due to increasing volatility in healthcare costs. Risks such as claims variability, workforce changes, and fragmented vendor relationships can emerge and escalate between annual reviews, making reactive decision-making less effective. Employers are encouraged to adopt a continuous, year-round approach to monitoring and managing benefits risk.

2. Volatility Drivers and Impact: Factors like specialty drug costs, workforce turnover, and demographic shifts are making benefits expenses less predictable and more concentrated among a small portion of plan members. Vendor fragmentation, especially in pharmacy benefits, can create hidden inefficiencies and misaligned incentives, further complicating cost control. Smaller employers are particularly vulnerable, as a few high-cost claims can disproportionately affect their financial outcomes.

3. Proactive Strategies and Collaboration: The article recommends that employers and their advisors develop a practical playbook that includes regular data monitoring, monthly checkpoints, and coordinated vendor management. Clinical programs that engage employees early and financial strategies like stop-loss optimization can help stabilize costs. Tailoring solutions to the specific risk profile of each employer, rather than adopting a one-size-fits-all approach, is emphasized as key to effective benefits risk management.