CAA 2026 Part 3: The Employer’s Fiduciary Responsibility Is Getting Harder to Ignore
One of the biggest changes coming out of CAA 2026 may have less to do with PBMs themselves and more to do with the employers hiring them.
VP of Employee Benefits · BHC Insurance · Independent Benefits Consultant
One of the biggest changes coming out of CAA 2026 may have less to do with PBMs themselves and more to do with the employers hiring them.
The first two parts of this series focused on transparency, rebates, PBM compensation and the true cost of prescription drugs. All of that is important, but there is another side to the transparency conversation that employers need to understand. Once you have access to more information about how your health plan dollars are being spent and how your vendors are being compensated, you can reasonably expect someone to be reviewing it.
That is where fiduciary responsibility comes into the picture.
Most employers do not think of themselves as healthcare fiduciaries. They think of themselves as manufacturers, contractors, banks, retailers, nonprofits, professional services firms or whatever business they happen to operate. The health plan is something they provide to recruit and retain employees, and responsibility for managing it usually falls somewhere between HR, finance, ownership and outside advisors.
But if you sponsor an ERISA health plan, there are fiduciary responsibilities that come with managing that plan. CAA 2026 does not suddenly create that concept, but the additional PBM transparency and compensation requirements make it much harder to separate health plan management from fiduciary oversight.
More Transparency Creates More Responsibility
I have been a strong advocate for transparency in healthcare for years. Employers cannot manage what they cannot see, and historically there have been far too many areas of the health plan where employers have been expected to write the check without having enough information to understand the transaction.
CAA 2026 moves us further away from that model, particularly with pharmacy benefits.
As we covered in Parts 1 and 2, employers should eventually have significantly more information about PBM compensation, rebates and other remuneration, pharmacy reimbursement, spread pricing, affiliated pharmacy relationships and the actual economics behind prescription drug spending.
That is a positive development.
But there is a second part to this that employers cannot overlook. Once that information becomes available, what did you do with it?
If a report shows substantial spread between what the plan paid and what pharmacies received, did anyone review it? If the PBM discloses significant indirect compensation, did anyone determine whether that compensation was reasonable? If specialty medications are consistently being directed to an affiliated pharmacy at a higher cost than other available channels, did anyone ask why?
Those are the questions I believe will become increasingly important.
Transparency gives employers an opportunity to manage their plans better, but it also removes some of the ability to say they simply did not know.
Fiduciary Responsibility Does Not Mean Finding the Cheapest Vendor
There is a misconception around fiduciary responsibility that I think is important to clear up.
Being a fiduciary does not mean an employer is required to choose the cheapest PBM, TPA, broker, network or healthcare vendor every time.
Price matters, but so do service, clinical quality, member experience, network access, administrative capabilities, financial stability, integration with the rest of the plan and a long list of other factors.
The responsibility is to follow a prudent process and act in the interests of the plan and its participants.
A more expensive vendor may absolutely be the better choice. The employer should simply be able to explain why.
Maybe one PBM charges a higher administrative fee but provides substantially better transparency and lower net drug costs. Maybe a TPA costs more but provides stronger claims management and better data access. Maybe an advisor charges a larger consulting fee but eliminates conflicts created by indirect vendor compensation.
The lowest visible fee is not always the lowest total cost, and fiduciary responsibility should not turn healthcare procurement into a race to the cheapest proposal.
What matters is whether the employer evaluated the options, understood the compensation, considered the relevant factors and made a reasonable decision based on the information available.
Section 408(b)(2) Is Important
One of the provisions employers should pay attention to is the expansion of PBM compensation disclosure requirements under the ERISA Section 408(b)(2) framework.
The basic concept behind Section 408(b)(2) is not particularly complicated. ERISA plans can enter into arrangements with service providers when the services are necessary, the contract or arrangement is reasonable and no more than reasonable compensation is paid for the services.
The challenge has always been determining what “reasonable compensation” actually means when employers cannot see all of the compensation.
CAA 2026 brings PBMs further into this disclosure framework and requires greater visibility into direct and indirect compensation connected to the services they provide.
That matters because the administrative fee on the invoice may represent only one piece of the PBM's economics.
If the PBM is also generating revenue through manufacturers, pharmacy spreads, specialty pharmacy operations, affiliated entities or other arrangements connected to the employer's plan, those economics become relevant when the employer evaluates the overall relationship.
The question is no longer simply, “What is our PBM administrative fee?”
It becomes, “What is the PBM's total compensation associated with our plan, and is that amount reasonable for the services we are receiving?”
That is a much better question.
Reasonable Compensation Requires a Comparison
Employers should not be expected to know exactly how much profit a PBM should make. I have been in employee benefits for a long time, and I would not pretend there is a universal number that makes a PBM arrangement reasonable or unreasonable.
Every plan is different.
But employers can establish a process for evaluating compensation.
That might mean periodically benchmarking PBM fees against the market, conducting an RFP, reviewing manufacturer compensation, analyzing specialty pharmacy economics, comparing net drug costs or having an independent advisor evaluate the contract.
The same principle applies to other health plan vendors.
If you have used the same TPA for 12 years and have never evaluated the market, that may be worth revisiting. If your broker compensation has increased substantially while services have remained the same, understand why. If a vendor receives significant indirect compensation that was not previously visible, determine what it represents.
You do not necessarily have to change vendors.
You should understand the arrangement.
The Employer Does Not Have to Become a PBM Expert
This is where I think some employers hear the word “fiduciary” and immediately become uncomfortable.
Nobody expects an HR director or CFO to suddenly become an expert in pharmacy contracting, specialty drugs, actuarial science, medical claims, stop-loss contracts and every other component of a health plan.
That would be unrealistic.
A prudent process can include hiring qualified people to help.
In fact, for many employers, that is probably the right answer.
The important part is making sure the people helping you are actually qualified and understanding how they are compensated.
If your consultant is helping evaluate PBMs, does that consultant have the expertise to analyze the contract beyond the rebate guarantee? Can they evaluate claims-level pharmacy data? Do they understand specialty pharmacy economics? Can they identify spread? Can they explain the PBM's direct and indirect compensation?
And just as importantly, is the consultant financially independent from the PBMs being evaluated, or are there compensation relationships the employer needs to understand?
CAA 2026 increases transparency around certain broker and consultant compensation connected to PBM business for exactly this reason.
Employers can delegate work.
They cannot completely delegate oversight.
Conflicts of Interest Need More Attention
Healthcare is full of vertically integrated relationships, and I think employers need to become much more comfortable asking questions about them.
A PBM may own the specialty pharmacy. A carrier may own the PBM. A healthcare navigation company may receive compensation from providers. A consultant may receive payments from vendors. A TPA may have preferred relationships with certain PBMs, networks or cost-containment companies.
None of those relationships automatically makes the arrangement bad.
But every one of them can create a financial incentive.
The employer's job is to understand enough about those incentives to determine whether they are aligned with the plan.
If the PBM requires members to use its own specialty pharmacy, ask whether the pricing is competitive.
If a consultant consistently recommends a particular vendor, understand whether there is compensation connected to that relationship.
If a TPA strongly prefers one PBM, ask why.
If a carrier will not provide meaningful claims data, understand what information you are giving up by accepting that arrangement.
These are not accusations. They are basic governance questions.
Employers should feel comfortable asking them.
Documentation May Be One of the Most Important Things Employers Can Do
One of the simplest improvements employers can make is documenting how major health plan decisions are made.
In my experience, many employers already have a reasonable decision-making process. The problem is that very little of it is documented.
A renewal meeting happens. The broker presents several options. HR and finance discuss them. Leadership chooses a direction. Everyone moves on.
Three years later, nobody remembers exactly why the decision was made.
That is easy to improve.
Keep meeting minutes or a short decision memo. Document which vendors were considered. Note the major financial and operational factors that were evaluated. Keep copies of compensation disclosures. Save the PBM analysis. Document why a particular vendor was selected or retained. If a major issue is identified in claims or pharmacy data, document what was done about it.
This does not have to become a massive administrative exercise.
The goal is simply to create a record showing that somebody was paying attention.
If an employer is ever asked why a particular decision was made, there should be something more substantial than, “That is what we have always done.”
Employers Should Consider a Health Plan Fiduciary Committee
For larger employers, I think CAA 2026 provides another good reason to consider establishing a formal health plan fiduciary or benefits committee.
Many employers already have retirement plan committees overseeing their 401(k) plans. Those committees meet periodically, review investment performance, evaluate fees, monitor service providers and document their decisions.
The health plan can cost the employer significantly more than the retirement plan, yet health plan governance is often far less formal.
That never made much sense to me.
A health plan committee does not need to meet every month. Depending on the employer, quarterly or semiannual meetings may be enough. The committee could include representatives from HR, finance, and executive leadership along with appropriate outside advisors.
The agenda might include claims performance, pharmacy spending, high-cost claimants, vendor compensation, PBM reporting, plan fees, network performance, major contract changes and upcoming renewals.
The point is not to create bureaucracy.
It is to create accountability.
Self-Funded Employers Have the Biggest Opportunity
These fiduciary concepts matter broadly, but self-funded employers are in a particularly important position because they generally have much greater control over how their health plan operates.
They select the TPA.
They select or influence the PBM.
They select stop-loss coverage.
They make decisions around networks, specialty pharmacy, navigation, clinical programs, cost-containment vendors and plan design.
They are also directly funding claims.
That creates both responsibility and opportunity.
A self-funded employer that takes fiduciary oversight seriously can use transparency to improve the plan financially and operationally. Better PBM data can lead to better pharmacy contracts. Better claims data can identify cost-containment opportunities. Better vendor oversight can expose unnecessary fees. Better documentation can create a stronger governance process.
CAA 2026 should not simply create another folder full of disclosures.
It should give employers more tools to manage their plans.
Fully Insured Employers Should Pay Attention Too
Fully insured employers have less direct control over many of these relationships, but I would not interpret that as having no responsibility to ask questions.
If you are paying millions of dollars in premium, you should understand what you are buying.
Ask what information the carrier can provide. Understand the pharmacy arrangement. Review broker and consultant compensation. Compare the market periodically. Understand the options available if transparency is limited.
For some employers, those questions may eventually lead to a broader conversation about whether fully insured is still the right funding model.
For others, staying fully insured may absolutely make sense.
Again, the answer does not have to be the same for every employer.
The process matters.
The Annual Renewal Meeting Is Not Enough
One of the biggest changes I would like to see in employer health plans is moving away from treating the renewal as the entire benefits strategy.
Too many plans are managed reactively.
The renewal comes out. Everyone gets nervous. The broker negotiates with the carrier or TPA. A few plan design changes are considered. Leadership approves something, open enrollment happens, and everyone waits until next year.
That is not really plan management.
A health plan should be reviewed throughout the year.
Claims should be analyzed.
Pharmacy should be reviewed.
Vendor performance should be monitored.
Contracts should be evaluated before renewal deadlines.
Compliance requirements should be tracked.
Strategic opportunities should be identified early enough to actually implement them.
CAA 2026 gives employers another reason to move toward that model because the information coming from PBMs and other vendors will be much more valuable if somebody is reviewing it throughout the year.
Start Building the Process Now
Employers do not need to wait for the full CAA 2026 PBM requirements to take effect before improving fiduciary oversight.
Start with the vendors you already have.
Identify who is responsible internally for overseeing the health plan. Gather current contracts and compensation disclosures. Understand how your broker or consultant is paid. Ask your PBM for information about direct and indirect compensation. Review your audit rights and data-access provisions. Determine who owns the claims data. Look at specialty pharmacy relationships and affiliated entities.
Then document what you find.
If there are areas you do not understand, ask questions.
If your vendor cannot answer them, that is useful information too.
This Is Where Transparency Becomes Governance
CAA 2026 is often discussed as PBM reform, and that is certainly a major part of it. But I think employers should look at the bigger picture.
The federal government continues to move the health plan market toward greater transparency. Employers are receiving more information about pricing, compensation, contracts and vendor relationships than they have historically had access to.
That creates an opportunity to manage healthcare differently.
But it also means employers need a process for reviewing that information and making decisions with it.
The employers that get the most value from CAA 2026 will not be the ones that simply collect the required disclosures and put them in a file. They will be the employers that use those disclosures to ask better questions, evaluate vendors more effectively, identify conflicts, negotiate better contracts, and document why important decisions were made.
That is what fiduciary responsibility should look like in practice.
It does not require an employer to know everything about healthcare.
It requires the employer to pay attention, ask reasonable questions, surround itself with qualified people, and have a process it can defend.
In **Part 4 of this series, I’ll move from fiduciary oversight into the PBM contract itself** and look at the provisions employers should be paying much closer attention to, including data ownership, audit rights, rebate definitions, spread pricing, specialty pharmacy, affiliated entities, reporting rights, and the contract language that ultimately determines how much transparency an employer really has.
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Sources & Further Reading
- ERISA Section 404 — Fiduciary Duties — Primary statutory source for the prudent person standard and exclusive benefit rule that govern employer health plan fiduciaries.
- ERISA Section 408(b)(2) — Reasonable Contract or Arrangement — Statutory basis for the reasonable compensation and conflict-of-interest disclosure requirements discussed in the article.
- Consolidated Appropriations Act, 2023 — Broker and Consultant Compensation Disclosure — CAA 2026 provisions that expand employer fiduciary obligations by requiring disclosure of all direct and indirect compensation.
- Johnson v. Fujitsu Technology and Business of America (N.D. Cal. 2018) — ERISA litigation precedent on employer fiduciary obligations for health plan vendor oversight and fee reasonableness.
- DOL: Understanding Your Fiduciary Responsibilities Under a Group Health Plan — DOL guidance document on employer fiduciary duties for group health plans under ERISA.
- FTC Report: Pharmacy Benefit Managers — Revenues and Fees (2024) — FTC findings on PBM compensation structures that create the conflicts of interest employers must now evaluate as fiduciaries.
About the Author
Corry Hull, REBC®, CSFS®
VP of Employee Benefits · BHC Insurance
Corry Hull, REBC® CSFS®, is VP of Employee Benefits at BHC Insurance and the founder of Employer Benefits IQ (www.employerbenefitsiq.com). He is a Certified Health Rosetta Advisor — one of fewer than 200 nationwide — and a multi-year presenter at United Benefit Advisors (UBA) national conferences. He specializes in self-funded health plan design, PBM contract strategy, stop-loss structuring, group medical captives, and ACA/ERISA compliance for mid-market employers. His work has been recognized by Health Rosetta (Rosie Award, 2026), UBA (Producer Peak Performer, 2025–2024), and BHC Insurance (Producer of the Year, 2021–2025). His employer-education content has been referenced in BenefitsPro and cited within the Health Rosetta advisor community. All consulting and brokerage compensation is fully disclosed.