United States: Health and Welfare Hot Topics

PBM- and COBRA-Related Lawsuits

A proposed class action was filed earlier this year against Johnson and Johnson and its Pension & Benefits Committee. It alleges violations of fiduciary duties in managing prescription drug benefits for participants in its employer-sponsored medical plans and selection of its pharmacy benefits manager (PBM). It also alleges failures to engage in a prudent process by negotiating lower prices with the selected PBM, considering contracting with a different PBM, using an alternative PBM approach, or carving out their specialty drug program from the PBM contract. This case suggests an increasing focus by plaintiffs on health plans, health plan fiduciaries and the rising costs of health care. Read more on this class action in our Legal Update.

In addition, class action lawsuits related to alleged violations of the notice requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) continue, alleging a variety of deficiencies. Employers are encouraged to periodically review their initial COBRA notices and their COBRA election notices to identify and address any potential deficiencies.

HIPAA Privacy Rule

The HIPAA Privacy Rule was amended effective June 25, 2024 (though with delayed compliance dates in many cases), with changes primarily related to reproductive care.

Plan sponsors should review their business associate agreements, HIPAA policies and procedures, and notices of privacy practices to determine whether updates are necessary.

IRS Guidance on Common Employer Programs

The Internal Revenue Service (IRS) has:

• Affirmed that employees may not be reimbursed for unused funds in a transportation flexible spending account, even when commuting was impossible due to COVID-19 restrictions.
• Issued FAQs describing certain employer-furnished work-life referral services—often referred to as caregiver navigation services—that may in some circumstances be considered a de minimis fringe benefit not subject to tax. Employers are more commonly making these services available to employees, many of whom are seeking assistance in identifying resources for care supports.
• Issued a reminder that many personal expenses for general health and wellness, including non-medical food, are not considered medical expenses under the Internal Revenue Code and thus are not deductible or reimbursable under health flexible spending accounts (FSAs), health savings accounts (HSAs), health reimbursement arrangements (HRAs) and medical savings accounts (MSAs).

Disclosure and Transparency

There is a continued focus on health and welfare plan disclosure and transparency, including through implementation of the Consolidated Appropriations Act of 2021 and the Transparency in Coverage Rules. Plans and plan sponsors must comply with myriad applicable laws, including those requiring regular reporting of health care costs and those related to surprise billing.

Pending Legislation

Pending legislation in this area includes legislation expanding access to, and availability of, health savings accounts (the Bipartisan HSA Improvement Act of 2023 and the HSA Modernization Act of 2023), as well as legislation expanding access to telehealth benefits (the Telehealth Benefit Expansion for Workers Act and the Telehealth Expansion Act), a legislative change regularly requested by plan sponsors. We continue to monitor and report on pending legislation that may impact employers and plan sponsors.

For more information, or if you have questions about how these changes affect your employer-sponsored health and welfare plans, contact an attorney in the Mayer Brown Employee Benefits group.