Common Excessive Cost Allegations
- Paying above-Medicare prices for hospital services without justification
- Failing to use reference-based pricing or direct contracting when available
- Accepting PBM spread pricing without monitoring or negotiating
- Paying excessive prices for specialty drugs when lower-cost alternatives exist
- Failing to implement formulary management strategies that reduce drug costs
- Accepting carrier network rates without benchmarking against alternatives
The Benchmark Problem
Plaintiffs are using publicly available pricing data — Medicare rates, 340B prices, international drug prices — to establish "reasonable" benchmarks for health plan costs. If a plan pays 300% of Medicare for hospital services when Medicare-plus contracts are available at 130–150% of Medicare, plaintiffs argue the plan is paying excessive prices. The benchmark data is publicly available and increasingly used in litigation.
Documentation Defense
IQ Insight
The best defense against excessive cost litigation is documented, active cost management. Document: (1) annual benchmarking of plan costs against Medicare rates and industry peers; (2) evaluation of cost management alternatives (RBP, direct contracting, international drug sourcing); (3) vendor performance reviews; and (4) fiduciary committee meeting minutes. A plan that can demonstrate active, documented cost management is far less vulnerable to litigation.