While a successful push by regulators towards retirement plan fee transparency began well over a decade ago, plan sponsors have remained largely in the dark during much of that time with respect to the fees paid by their group health plans. The Consolidated Appropriations Act (CAA) of 2021 expanded service provider fee disclosure requirements already in place for retirement plans to apply to group health plans. However, the requirements only applied to new or amended contracts and arrangements with covered service providers. These fee disclosure requirements have slowly served to improve fee transparency from brokers and consultants. But the fees for pharmacy benefit managers (PBMs), one of a group health plan's largest costs, have remained opaque. 

Now, thanks to the CAA of 2026 passed earlier this year, as well as proposed regulations from the Department of Labor (DOL), a new era of PBM fee transparency is coming. The CAA of 2026 will require mandatory reporting of PBM drug costs and charges, including the markup between the PBM's cost of purchasing drugs and what it charges the plan. PBMs will also be required to pass along 100% of any drug manufacturer rebates back to group health plans, and plan sponsors will have expanded rights to audit a PBM's services. The DOL's proposed regulations, issued shortly before the passage of the CAA of 2026, are expected to be integrated with the requirements of the CAA, when finalized. The regulations would also create new compensation and fee disclosure requirements for PBMs and related service providers.

The PBM disclosures will generally not apply to calendar year plans until 2029. In the meantime, plan sponsors should consider amending PBM agreements to incorporate the requirements of the CAA of 2026 and the final DOL regulations (when available). And plan sponsors should ensure they are satisfying their fiduciary duties by reviewing group health plan fee disclosures from other service providers for reasonableness. A group health plan's legal risk will not necessarily increase as a result of the increased transparency alone, though failure by a plan sponsor to review the available disclosures, consider the reasonableness of fees, and take any necessary actions will no doubt increase a plan sponsor's fiduciary exposure.