Blaming Health Insurance CEOs Misplaced

CEOs often say their employees are their most important asset. Yet, when it comes to protecting that asset, it’s the CEO who may be dropping the ball—even though employees frequently represent a company’s second or third largest expense. Decision-making is often delegated from the CEO to the CFO and, if it’s a larger company, through HR to a benefits manager. The decision maker may knowing or unknowingly, limit choices to the “BUCA” options—Blue Cross Blue Shield, UnitedHealth Group, Cigna, and Aetna—which collectively cover nearly 170 million US lives. The decision maker may do this thinking bigger is better and because they have the largest network.

With thorough research and, potentially, guidance from independent consultants, companies could secure better premiums, improve outcomes, reduce denials, and enhance employee satisfaction. However, many organizations rely only on advisors who focus narrowly on premiums, ignoring outcomes, denial rates, and member satisfaction. This is particularly problematic when using commission-based advisors whose incentives align with insurers, not the employers or employees. For the advisor/consultant, higher premiums yield higher commissions, bonuses, trips and other rewards.

Unbundling the Health Plan for Transparency:
Health plans typically consist of four major components. In traditional BUCA plans, the carrier manages and controls all four, making it difficult to access transparent data or achieve fair pricing. Unbundling these components gives employers crucial visibility. If CEOs understood these dynamics and unbundled their plans, they could demand more equitable arrangements. One key area is Pharmacy Benefit Managers (PBMs), where Mark Cuban has identified seven ways current PBM contracts drive up costs. This is at the heart of why Cuban started his Mark Cuban Cost Plus Drug Company (MCCPDC).

Growing Pressure on CEOs to Act:
Unfortunately, employees are limited to the choices their employer has made on their behalf Increasing outrage from employees—who also happen to be patients—should be a warning sign for CEOs. If this dissatisfaction isn’t enough, the threat of lawsuits will be.

A Call for Corporate Accountability:
Healthcare costs quietly erode corporate profits and employees’ financial well-being, demanding top-level attention. In the past, CEOs and CFOs have improved retirement plans by enhancing transparency and reducing fees. The same approach should be applied to healthcare. Scrutinizing costs, benefits, and reduces corporate risk.

Yet healthcare expenses often go unchecked. Given legal and fiduciary obligations, CEOs and CFOs must demand greater transparency to ensure fair pricing, boost employee satisfaction, and mitigate legal risk.

The Push for Transparency: CAA and ERISA Requirements:
Recent regulations bolster this need for transparency. The Consolidated Appropriations Act (CAA) of 2021 imposes new requirements, and the Employee Retirement Income Security Act (ERISA) obligates employers to act in their employees’ best interests. This includes securing reasonable healthcare costs and assessing the appropriateness of fees. High-profile lawsuits serve as warnings for executives who ignore these responsibilities.

The Legal Landscape:
The CAA mandates greater disclosure, helping employees understand what they’re paying for. ERISA requires fiduciaries to act solely in the interest of plan participants—negotiating fair prices, ensuring fee transparency, and preventing excessive markups. Failure to meet these standards has led to lawsuits alleging fiduciary breaches.

These lawsuits highlight real financial harm. Companies have been accused of failing to negotiate fair PBM and insurer rates, leading to inflated prescription and service costs. These cases underscore the urgent need for executive oversight.

Case Studies: The Cost of Inaction

• Navarro v. Wells Fargo & Co. (2024): Wells Fargo’s health plan allegedly paid $9,994.37 for a 90-day supply of a generic multiple sclerosis drug that cost $648 to $895 elsewhere. Markups reportedly reached 115% for preferred generics and 383% for specialty generics.
• Lewandowski v. Johnson & Johnson (2024): J&J’s plan allegedly imposed a 498% markup on a generic specialty drug, charging $10,239.69 instead of the $40–$77 retail price. Individual executives were named, showing that personal liability can extend to leaders who fail their fiduciary duties.
• Kraft Heinz Co. v. Aetna Life Insurance Co. (2023): Kraft Heinz accused Aetna of fee mismanagement and cost inflation.
• Ford Motor Co. v. Blue Cross Blue Shield of Michigan (2023): Ford alleged price-fixing and inflated costs by BCBS, suggesting that anti-competitive practices must be scrutinized.
• Other Similar Cases: Aramark, Huntsman International, and Mayo Clinic also face lawsuits alleging overpayment, undisclosed fees, and withheld cost data.

The Core Issue: Inadequate Fiduciary Oversight
These lawsuits often stem from executives failing to explore less costly PBM options. “As fiduciaries of health and welfare plans, leaders must follow a prudent decision-making process: benchmarking compensation, evaluating plan performance, exploring alternatives, and documenting their choices,” Chelsea Ryckis, President, Ethos Benefits.

Yet many executives blindly trust commission-based advisors or assume that bigger insurers and brokerages are safer. This status quo bias leads to overpayment, inferior care, and missed opportunities for innovative solutions. Larger vendors often have misaligned incentives, resulting in exorbitant costs compared to more transparent, independent providers.

Broader Implications and Future Trends:
As more companies face litigation, the demand for healthcare transparency will only intensify. Beyond legal risks, companies risk reputational harm—especially those depending on public trust. By proactively managing costs and demanding transparency now, executives can align with evolving regulations, protect employees, and safeguard corporate interests.

Forward-thinking leaders who embrace cost-transparency measures today will be better prepared for tightening regulations tomorrow. Doing so not only mitigates legal risks but also fulfills fiduciary duties and reinforces the company’s commitment to its most important asset—its employees.