At A Glance
- There have been a number of important developments in the United States relating to health and welfare over recent months.
- Gender-affirming care, state laws regarding pharmacy benefit managers, and recent health and welfare litigation will all require sponsors and administrators of health plans to watch this space.
Gender-Affirming Care
On January 28, 2025, the White House issued an Executive Order (EO) entitled "Protecting Children from Chemical and Surgical Mutilation." The EO addresses the "maiming and sterilizing [of] a growing number of impressionable children under the radical and false claim that adults can change a child's sex through a series of irreversible medical interventions," and it generally attempts to limit the ability of minors to access such care. For example, the EO rescinds previous agency policies based on guidance from the World Professional Association for Transgender Health (WPATH) and directs agencies providing funding to medical schools and hospitals to ensure such institutions do not provide gender-affirming care. The EO comes on the heels of a variety of state laws that encompass a range of approaches to gender-affirming care for minors, from criminalizing gender-affirming care to explicitly requiring coverage for gender-affirming care by in-state health insurance plans.
These federal and state directives have created some uncertainty for sponsors and administrators of health plans governed by the Employee Retirement Income Security Act of 1974 (ERISA). Plan sponsors and administrators have questioned the extent to which they are subject to these state laws and what effect the EO may have on them—for example, many health plan third-party administrators/insurers rely on WPATH criteria in determining whether a plan should fund gender-affirming care.
ERISA's broad preemption provision generally exempts "self-funded" (as opposed to fully-insured) plans from the application of state laws that impose civil liability for assisting in the provision of gender-affirming care for minors and by state laws that claim to require that health plans cover such care. However, ERISA's preemption provision does not apply to "generally applicable criminal law[s] of a State." ERISA Section 514(d). It is unclear the extent to which there could be criminal consequences under state law for self-funded plans that cover gender-affirming care for minors—or whether state gender-affirming care laws are enforceable at all. The Supreme Court recently upheld a ban on gender-affirming care for minors in Kentucky and Tennessee in United States v. Skrmetti, 605 U.S. __, No. 23-477 (June 18, 2025). Additional rulings in cases that were held in abeyance while Skrmetti was pending are expected soon, and additional states may decide to impose bans on gender-affirming care in Skrmetti's wake.
Pharmacy Benefits Manager State Laws
In recent years, a spate of state laws and regulations have been enacted regarding pharmacy benefit managers (PBMs). Some such laws impose certain duty of care requirements on PBMs, regulate PBM pricing practices, or regulate PBM network requirements. Some state insurance regulators have taken the position that the PBM regulations allow them to collect extensive data from PBMs, including regarding reimbursements, fees, or other information relating to claims processing, all in apparent service of ensuring that the PBMs are in compliance with relevant laws. For example, the Florida Officer of Insurance Regulation recently sought a trove of data from PBMs about participants in plans with which the PBMs had contracted, including personally identifiable prescription drug data.
Some courts have already addressed whether aspects of state PBM laws are preempted by ERISA insofar as they relate to self-funded health plans. See, e.g., Rutledge v. Pharma. Care Mgmt. Ass'n, 141 S. Ct. 474 (2020) (holding that Arkansas statute regulating PBM setting of pharmacy reimbursement rates was not preempted by ERISA); Pharma. Care Mgmt. Ass'n v. Mulready, 78 F.4th 1183 (10th Cir. 2023) (holding that Tennessee statute regulating PBM networks was preempted by ERISA). However, courts generally have not yet addressed these data requests, which may extend beyond information that health plans would be comfortable sharing. These laws may also implicate privacy concerns under the Health Insurance Portability and Accountability Act ("HIPAA") and raise fiduciary concerns for plan administrators who wish to protect participant data. Plans may wish to consider data requests to PBMs on a case-by-case basis in determining whether to authorize PBMs to disclose plan data.
Recent Health and Welfare Plan Litigation
Recent lawsuits alleging breaches of fiduciary duty regarding health and welfare plans serve as a reminder that health and welfare plans are ERISA plans too—and the same fiduciary duties that apply to retirement plans apply to them as well. While plaintiffs have not yet seen success in these suits, they are being seen as the first in a coming wave of fee litigation against health and welfare plans. The plaintiffs in these cases generally allege a breach of fiduciary duty through failure to manage prescription drug costs under employer-sponsored plans, arguing that this mismanagement caused the plans and participants to pay substantially more for benefits than they would have absent this mismanagement. Some of these cases have also alleged prohibited transaction claims under ERISA against plan fiduciaries. In general, courts have dismissed these cases on the basis that the plaintiffs lacked Article III standing under the Constitution because they did not show that they suffered a concrete injury, but have granted plaintiffs leave to file amended complaints.
In light of this litigation, health plan fiduciaries may wish to take a number of steps, such as reviewing health plan offerings, benchmarking fees, and/or ensuring proper delegations are in place so that fiduciary duties are clear.
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