patientrightsadvocate.org
The lack of transparency in prices in so much of our healthcare system is shocking. All actual prices should be revealed, and bills should be itemized, just as we expect them to be at hotels, grocery stores and for all other products and services in the marketplace.
Guest post by Cynthia A. Fisher
A series of recent lawsuits over unreasonable employer health plan costs could revolutionize U.S. healthcare in the same way lawsuits over high-cost retirement plans transformed investing a decade or so ago.
This summer the Sixth Circuit Court of Appeals ruled in favor of Tiara Yachts, Inc. (a Holland, MI, boatmaker) in its lawsuit against its third-party administrator, Blue Cross Blue Shield of Michigan (BCBSM), for systemically overpaying health claims and squandering health plan assets. The appeals court reversed the lower court’s dismissal of the case and remanded it for further proceedings.
According to Tiara’s complaint, BCBSM knowingly overpaid millions of dollars in health claims, capitalized on its mismanagement and hid this information from Tiara by refusing to share claims-payment information. The appeals court suggests that BCBSM violated its fiduciary duty to administer the health plan in the best interests of employees.
Earlier this year, JPMorgan Chase employees filed a lawsuit alleging a fiduciary breach due to routine overcharges at its health plan. The lawsuit claims JPMorgan Chase’s pharmacy benefits manager (PBM), CVS Caremark, which is owned by the insurer Aetna, charged grossly inflated medication prices that resulted in employees overpaying for their healthcare coverage.
For example, the health plan allegedly paid $6,229 for a 30-unit supply of teriflunomide. This multiple sclerosis medication is available for $11 without insurance at Mark Cuban’s Cost Plus Drug Co.
Employees at other major companies, such as Wells Fargo and Johnson & Johnson have filed similar lawsuits over the last couple of years in response to health plan overpayments that have led to runaway costs in care and coverage. According to the Kaiser Family Foundation, the average annual employer-sponsored family premium is $25,600, up 50% over the last decade, reducing workers’ wages and take-home pay. A new report by the Business Group on Health expects these premiums to increase by another 9% next year.
These lawsuits can expose such health insurance financial gamesmanship as spread pricing, self-dealing and “shared savings” arrangements that drive up health plan costs for businesses and workers. Favorable rulings would ensure that health plan administrators act as fiduciaries, ending the information blocking, hidden claims-payment data and anti-audit contract provisions that facilitate overcharges and prevent employers from offering affordable plans.
These lawsuits borrow from the successful playbook used at other major companies to transform overcharging, opaque and conflicted employer retirement plans into the low-cost, price-transparent and self-directed funds that most employees benefit from today.
In 2007 employees at Edison International filed a lawsuit claiming their employer breached its fiduciary duty by offering high-fee retail mutual funds in its 401(k) plan instead of lower-cost alternatives, reducing employee retirement balances. In 2015 the case reached the U.S. Supreme Court, which ruled in favor of the employees, emphasizing that employers have a fiduciary duty to actively and continually monitor the costs and value of benefits. The same year, Lockheed Martin’s and Boeing’s employees settled similar lawsuits for $62 million and $57 million, respectively.
These retirement plan lawsuits forced the financial services industry to be transparent about brokerage and investment fees charged to retirement plans and paid by workers’ savings, making investing affordable, accessible and equitable.
Unfortunately, healthcare charges and fees remain opaque, with health insurers, administrators and PBMs working behind closed doors to profiteer off employers and workers. For example, a New York Times investigation last year found that employer health plans often pay insurers and third parties far more to process claims than doctors receive for providing care.
Lawsuits against insurance carrier middlemen will finally expose rampant spread pricing and overcharging far above provider charges. Price transparency and payment accountability will enable health plans to follow in the footsteps of retirement plans to a low-cost, high-integrity model that returns industry funds to employers, public-sector budgets and paychecks, where they belong.
—Cynthia A. Fisher, founder and chairman of PatientRightsAdvocate.org