EMPLOYEE BENEFITS
Takeaways from the J&J Lawsuit
How is Your Health Plan Managed?
Health plans are under the microscope like never before. Johnson & Johnson found this out firsthand when a class action lawsuit was filed against the company (Lewandowski v. Johnson & Johnson), alleging that J&J breached its fiduciary duty related to its health plan.
No matter your company’s size, you can learn from this lawsuit and take proactive steps to ensure your health plan management approach protects you and your employees.
What are the allegations against J&J?
The J&J lawsuit alleges that the company didn’t properly monitor the cost of prescriptions or specific medical care for employees. As you can see below, there’s a staggering price difference – something that raised a major red flag.
A few examples include:
Where did J&J allegedly go wrong?
While we don’t know the ins and outs of their health plan management, these allegations against J&J likely could have been avoided with a few key steps, including:
- Conducting an open RFP for their Pharmacy Benefit Management (PMB) services. A PBM acts as an intermediary between prescription drug manufacturers, pharmacies, and health plan sponsors.
- Adequately negotiating the plan contract with the PBM – it’s not enough just to have a PBM; you have to ensure your contract works for your benefit.
- Properly supervising third-party service providers to help prevent the significant cost swings listed above.
What can your company do to steer clear of these types of issues?
Whether your plan is self-funded or fully insured, you have to play an active role in managing your health plan. The increased scrutiny from both internal and external sources means it’s more important than ever to get ahead of potential risks and issues.
- Establish a committee for health plan management to ensure that your plan incorporates insights and expertise from multiple sources.
- Document and negotiate compensation for each service provider associated with the plan – documentation is vital in the event of an issue or possible litigation.
- Determine if fees are reasonable for the services provided so you (and your employees) don’t pay more for less.
"No matter your company’s size, you can learn from this lawsuit and take proactive steps to ensure your health plan management approach protects you and your employees."
Rich Hejny
Best Practices
What are some best practices for self-funded employers?
If you have a self-funded plan, you may be able to take advantage of some added flexibility with plan management.
- Evaluate options that allow you to unbundle parts of your health plan ecosystem (like PBM, medical management, networks, navigation, etc.)
- Put the power into your employees’ hands by providing tools to shop for services based on cost and quality.
- Ensure you have access to plan data to perform audits as needed.
What are some best practices for fully insured employers?
If your plan is fully insured, you must proactively review your options.
- Evaluate self-funded options to make an educated decision if cost, quality, and outcomes can be improved.
- If possible, transition your broker compensation to a per employee/contract per month or flat fee basis vs. percentage of premium.
- Ensure access to as much claims data as possible (this will largely depend on your company’s size and state requirements).
The Bottom Line
Managing your health plan isn’t just an important way to mitigate risk – it’s an essential part of your commitment to your team. As leaders, you are the stewards of your employees’ health benefits, and those benefits have a significant financial impact on your employees and their families.
It's not just about checking boxes for compliance; it's about showing your team you've got their backs and keeping your organization financially sound – and we’re here to help.
Our team is well-versed in the nuances of health plan management, and we can support your organization’s oversight and risk management strategy by asking the right questions and leveraging our in-depth industry expertise.
Reach out to me at Rich.Hejny@thinkccig.com for a conversation about your company.