Contract and Claim Analysis: Helping Fiduciaries Manage Plan Assets Appropriately

By Team PCM | Feb 29, 2024 | Blog post, Contract Management, Plan Management

The J&J class action lawsuit is at the top of the watch list for many self-insured plans and their benefits consultants. Fulfilling fiduciary duties to manage the plan assets in the participants’ interests means asking a tough question: was money spent appropriately?

To judiciously answer this question, self-insured plans need to evaluate how their pharmacy contract compares to market rates and how each claim cost compares to fair market value. As the fiduciary, did you spend more than needed?

Contract Value

At the most basic level, many benefits experts claim to meet fiduciary duties by comparing a plan’s pharmacy contract to a handful of similar programs. Perhaps the broker pushes to preferred contracts, carved-in, carved-out coalitions, that fall under the brokerage. While keeping a market comparison “in-house” may simplify the process, it may result in additional liability to the plan sponsor due to the evaluation’s limited scope.

Claim Value

A more thorough contract evaluation includes identifying and analyzing plan spend at the claim level to determine if the money spent and fees charged meet fair market value or if you overpaid. Detailed claims analysis involves a deeper dive into how individual medication is priced compared to the industry average.

When evaluating at the claim level, fiduciaries should ask:

• What are my participants paying for specific medications?
• What is the price for those medications outside traditional retail/mail sources?
• What was the cash price?
• What direct and indirect fees contribute to the drug cost?
• How do those fees affect the overall cost of the medication?
• What is the participant’s portion of that cost?

Fair Market Value 

Ultimately, the J&J lawsuit is one of the first cases where a self-insured plan is being accused of not spending plan assets in the best interest of plan participants. By not receiving plan data or reviewing it in depth, self-insured plan sponsors open themselves up to significant fiduciary and financial liability. 

Management of plan assets must be validated on a larger level than before, based on the CAA, a greater push for transparency into indirect and undisclosed revenue streams, and recent lawsuits. Future requirements attesting to the market being sampled – on a contract and claims level – will be enforced to ensure that plan assets are spent wisely. By considering the questions above and employing tools that validate pharmacy spend, plan sponsors will have the insights they need to manage plan assets appropriately, enhance transparency, and optimize plan governance, certifying that contracts and vendors spend their participants’ money appropriately.  

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Prescription Care Management is a health tech company dedicated to simplifying pharmacy and medical plan management for brokers, TPAs, PBMs, Rx consultants, and self-insured plans. With claims-level analytics and insights, the PCM platform validates pharmacy (and soon medical) contract spend, guarantees, and rebates with a click. To learn more about partnering with PCM​, click here.

Contract and Claim Analysis: Helping Fiduciaries Manage Plan Assets Appropriately.

By Team PCM | Feb 29, 2023 | Blog post, Contract Management, Plan Management

The J&J class action lawsuit is at the top of the watch list for many self-insured plans and their benefits consultants. Fulfilling fiduciary duties to manage the plan assets in the participants’ interests means asking a tough question: was money spent appropriately?

To judiciously answer this question, self-insured plans need to evaluate how their pharmacy contract compares to market rates and how each claim cost compares to fair market value. As the fiduciary, did you spend more than needed?

Contract Value

At the most basic level, many benefits experts claim to meet fiduciary duties by comparing a plan’s pharmacy contract to a handful of similar programs. Perhaps the broker pushes to preferred contracts, carved-in, carved-out coalitions, that fall under the brokerage. While keeping a market comparison “in-house” may simplify the process, it may result in additional liability to the plan sponsor due to the evaluation’s limited scope.

Claim Value

A more thorough contract evaluation includes identifying and analyzing plan spend at the claim level to determine if the money spent and fees charged meet fair market value or if you overpaid. Detailed claims analysis involves a deeper dive into how individual medication is priced compared to the industry average.

When evaluating at the claim level, fiduciaries should ask:

• What are my participants paying for specific medications?
• What is the price for those medications outside traditional retail/mail sources?
• What was the cash price?
• What direct and indirect fees contribute to the drug cost?
• How do those fees affect the overall cost of the medication?
• What is the participant’s portion of that cost?

Fair Market Value 

Ultimately, the J&J lawsuit is one of the first cases where a self-insured plan is being accused of not spending plan assets in the best interest of plan participants. By not receiving plan data or reviewing it in depth, self-insured plan sponsors open themselves up to significant fiduciary and financial liability. 

Management of plan assets must be validated on a larger level than before, based on the CAA, a greater push for transparency into indirect and undisclosed revenue streams, and recent lawsuits. Future requirements attesting to the market being sampled – on a contract and claims level – will be enforced to ensure that plan assets are spent wisely. By considering the questions above and employing tools that validate pharmacy spend, plan sponsors will have the insights they need to manage plan assets appropriately, enhance transparency, and optimize plan governance, certifying that contracts and vendors spend their participants’ money appropriately.  

—

Prescription Care Management is a health tech company dedicated to simplifying pharmacy and medical plan management for brokers, TPAs, PBMs, Rx consultants, and self-insured plans. With claims-level analytics and insights, the PCM platform validates pharmacy (and soon medical) contract spend, guarantees, and rebates with a click. To learn more about partnering with PCM​, click here.