Why it’s hard for corporate America to buy the best health care for employees

Under the Consolidated Appropriations Act (CAA) of 2021, employers have a clear fiduciary duty: ensure health plan dollars are spent only on reasonable expenses for high-quality services. It’s a law that makes sense. No CEO wants to overpay for underperformance. No employee wants to see their premiums and deductibles balloon while care and service quality wane.

But how can U.S. corporations meet their legal obligation when the system is designed to keep them in the dark? The market gives employers virtually none of the tools they need to comply with their legal fiduciary obligation.

This places employers in an impossible position to meet their legal fiduciary responsibility.

Imagine being told to buy the very best car for your family — but you can’t know the price, the safety rating, or the miles per gallon. That’s the situation employers face when purchasing health care for their workforce. They’re held accountable for making prudent purchasing decisions, while powerful industry players — insurance carriers, Pharmacy Benefit Managers (PBMs), and Third-Party Administrators (TPAs) — operate behind a curtain of opacity and contractual gag clauses.

This unfair marketplace is putting employers at legal risk. Several lawsuits have already been filed by employees alleging that their companies breached their fiduciary duties. And more are on the way.

To protect themselves — and, more importantly, their employees — CEOs, CFOs, CHROs and their teams, must act with urgency and clarity. This isn’t a back-office compliance issue. It’s a boardroom priority.

Here’s what employers can do now:

1. Understand the fiduciary obligation

If you are a corporate leader and you’re not familiar with your obligations under the CAA, educate yourself or find a partner to get you up-to-speed quickly. This law is not optional, and ignorance won’t protect you in court. Ensure other leaders are educated too, including HR, legal and procurement teams on this fiduciary responsibility and how to mitigate risk.

2. Break free from conflicted advice

Stop relying on the foxes to guard the henhouse. Too many “consultants” are financially tied to the very carriers and vendors they’re supposed to evaluate. Employers should engage independent advisers who are contractually and financially free of conflicts of interest. Without this, there is no way to ensure the objectivity or integrity of your health plan decisions. Before entering any consulting engagement, require potential advisors to fully disclose any conflicts of interest. Choose those that are unconflicted and solely aligned with your organization’s goal. Unbiased, conflict-free advisors are essential for employers to effectively fulfill their fiduciary responsibilities.

3. Demand your data — and use it

These three tips are crucial and form the baseline for fulfilling a corporation’s legal responsibility to its workforce.

U.S. corporations are doing a huge lift already by providing ESI benefits to more than half of Americans. Next to employee salaries, health care is the second line item that’s ever-increasing – well beyond the rate of standard inflation.

Related: With tariffs in the mix, pharmacy benefits deserve a second look

In fact, health care costs are projected to rise nearly 8% in 2025—significantly outpacing general inflation, which experts estimate at about 3%. Added pressures, such as tariffs and the recently signed budget bill, could drive costs for the commercial market even higher. Additionally, it's well documented that roughly 30% of health care spending is wasted. Employers must prioritize strategic initiatives to eliminate fraud, waste, and abuse as part of their health care procurement efforts. These savings could then be reinvested into core business operations and future growth.

Corporate America is made up of global industry leaders, expert at doing what they do best in their respective sectors – from designing and building airplanes, communications technology, smartphones and semiconductors to operating the largest retail chains and more. It’s important for employers to apply the same procurement rigor and business acumen to purchasing health care for their employees as they do in managing their global supply chains. The high standards used in product procurement should also guide their multi-billion-dollar health care buying decisions.

Health care is undeniably complicated. That’s why it’s more crucial than ever to work with expert advisors who are truly unconflicted, ensuring you receive the best quality care at the most competitive price.

Even with such unbiased expert advisors by your side, the commercial health care marketplace is broken. We must fix it, and employers can’t do it alone.

A good first step is President Trump’s executive order on health care pricing transparency. More is needed such as aggressive federal enforcement, banning anti-competitive practices, and reining in the excesses of powerful intermediaries who have built their business models on — and profit from — the complexity and confusion.

Collectively, employers have enormous leverage. It’s time for the health care industry and the administration to step in to do their part. Let’s collaborate to change the system. We need an American health care system that works — for business and for people.

Elizabeth Mitchell is President and CEO of Purchaser Business Group on Health, a nonprofit coalition representing 40 private employers and public entities across the U.S. that collectively spend $350 billion annually purchasing health care services for more than 21 million Americans and their families. Previously, she held leadership roles at Blue Shield of California, the Network for Regional Healthcare Improvement, and the Maine State Legislature.