California recently passed Senate Bill 4, which is a law targeting pharmacy benefit managers (PBMs) with no exclusion for plans governed by the Employee Retirement Income Security Act (ERISA). According to the Pharmaceutical Care Management Association, a PBM group, the California PBM law will, on average, increase employer plan costs by $1,800 per participant each year.
Optum Rx, a PBM, and Emisar Pharma Services, a group purchasing organization (GPO), both help UnitedHealth Group manage prescription drug plans. The PBMs have now filed suit against California, claiming that the state is applying its law to self-insured employer health plans and public employee health plans, in direct violation of ERISA. ERISA is a federal law that preempts any state laws that seek to regulate large employee benefit plans to maintain national uniformity among plans. Absent preemption, PBM laws would require employers to develop state-specific rules applicable to PBMs, thereby undermining ERISA’s focus on uniformity.
Optum Rx and Emisar claim that the state PBM law conflicts with their mission to make healthcare more affordable and accessible. They point out that the law threatens small businesses’ ability to tailor plans to their needs, leading to higher costs and fewer choices for employers. The PBMS argue that allowing a state law to preempt ERISA would have complex and costly consequences, and that health plan sponsors are in the best position to craft benefit plans for their members.
The Optum Rx/Emisar suit in California joins a handful of other suits over PBM laws in states like Arkansas, Iowa, and Tennessee.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.
