Important Notice for Self-Funded Health Plans: Review Legal Recovery Amendments Carefully

Over the past several months, a number of major health plan administrators, third-party administrators (TPAs), and pharmacy benefit managers (PBMs) have begun notifying self-funded health plans of proposed changes to their administrative service agreements regarding legal recoveries and class action settlements.

While the specific language varies by organization, many of these amendments seek to grant the administrator authority to pursue legal recoveries on behalf of the plan, including authority related to litigation, class action participation, settlement decisions, and the engagement of legal counsel.

In some cases, these changes may also:

• Apply to both current and future claims.

• Be presented as amendments to existing administrative agreements.

• Authorize the administrator to make litigation and settlement decisions on behalf of the plan.

• Permit the administrator to participate in or opt out of class actions.

• Allow the administrator to retain a percentage of future recoveries as compensation for recovery services.

• Become effective unless the plan sponsor takes affirmative action to decline or opt out.

Because these provisions can affect a plan sponsor's rights and control over potential recoveries, employers and benefit plan fiduciaries should carefully review any notices, amendments, renewal documents, or communications received from their health plan administrator, TPA, PBM, or other service providers.

Why This Matters

Over the past decade, self-funded health plans have become increasingly eligible to recover funds arising from antitrust litigation, healthcare industry settlements, pharmaceutical pricing matters, provider reimbursement disputes, and other legal actions. As a result, many service providers are reevaluating how these opportunities are managed and who has authority to pursue them.

Before agreeing to any amendment, plan sponsors may wish to consider questions such as:

• Who controls litigation and settlement decisions?

• Can the plan pursue opportunities independently?

• How are recovery proceeds allocated?

• What fees or percentages will be deducted from recoveries?

• Does the amendment apply retroactively?

• What reporting and transparency will be provided?

• Can authority be revoked in the future?

• How might the amendment affect existing recovery efforts or future opportunities?

• Is data used for the settlement limited to the period that they used the TPA or PBM?

• Can the TPA or PBM subtract “costs”?

Our Recommendation

MCAG is not a law firm and does not provide legal advice. However, we encourage all plan sponsors to carefully review any proposed amendments related to legal recoveries, class actions, litigation authority, settlement rights, or recovery fees.

These notices often contain important contractual changes that may affect a plan's rights and future recoveries. Employers should consult with legal counsel, benefits advisors, or other trusted professionals before accepting, declining, or taking no action regarding such amendments.

Questions?

If you have received a notice regarding legal recoveries, class action settlements, litigation authority, or similar amendments and would like to understand how such changes may affect current or future recovery opportunities being monitored by MCAG, please contact us.

As the saying goes, the devil is in the details. A few pages of contract language today can determine who controls recovery decisions—and who receives the proceeds—tomorrow.

MCAG

MCAG has extensive experience filing into settlements related to the plan(s), especially those related to alleged overpayments on drugs purchased by the plan for members. There are 4 such settlements with deadlines in the next 6 months, totaling over $850M.