Are Your Contracts Hurting Your Plan?
Many employers assume their health plan contracts are well drafted. In reality they are often one-sided agreements using vague terms to cover hidden loopholes. These contracts, and the lax procurement processes that created them, often lead to millions in unnecessary spending, compliance risks, and reduced benefits for employees.
Real-World Case Study: How One Employer Discovered a $25 PMPM Oversight
A mid-sized company was confident in their PBM contract. When asked about pricing, the contract owner was quick to say “we get 100% of rebates.”
An independent review uncovered millions in cost savings in the form of hidden rebates, admin fees, spread pricing, formulary manipulation, and other techniques never addressed in the contract. The PBM retained these funds without clear disclosure.
By using a disciplined RFP process and negotiating with a fiduciary mindset, the company secured full transparency and a 20% reduction in drug spending.
Key Takeaway: If you’re not actively reviewing your contracts, you may be overpaying and increasing compliance risk without even realizing it.
5-Minute Contract Review
Are hidden contract risks costing you? Run through this quick checklist to find out:
☑️ Resistance – Do service providers push back or claim disclosure requirements don’t apply to them when asked for full transparency?
☑️ Lack of Data Access – Does your TPA or PBM limit your ability to access or use claims data?
☑️ Opaque Pricing – Are broker, TPA, or PBM compensation details vague or undisclosed?
☑️ One-Sided Termination – Do contract terms favor the service provider making it hard or expensive to switch?
If you answered “yes” to any of these questions, your contracts may be leaking money and exposing you to compliance risks.
Contract Language to Protect Your Plan
Many employers want to push back on bad contract terms—but they don’t always know the right places to start. Here’s some plug-and-play language for an RFP or to help kickstart a contract renegotiation:
- Gag Clauses in TPA and PBM contracts: “Based on the latest Department of Labor (DoL) guidance and to fulfill our fiduciary duties, our company requires unrestricted access and unlimited ability to share claims data.”
- Disclosure Clauses in Agent, Broker, and Consultant Contracts: “Based on the CAA, our company requires full disclosure of all actual and anticipated cash and non-cash compensation and incentives including overrides in connection with any sale, renewal, expansion, and extension associated with our contract.”
- Disclosure Clauses in PBM and TPA Contracts: “Based on the CAA, our company requires full disclosure of all actual and anticipated compensation, including direct and indirect payments, rebates, concessions, spread pricing, etc. received by your company and any affiliates, GPOs, etc.”
- Termination Clause: “The plan sponsor must have the right to terminate this agreement without penalty if the vendor fails to provide full transparency or meet disclosure obligations.”
Don’t just sign on the dotted line – master contract negotiations to protect your health plan’s finances and management.
What’s At Stake?
- Compliance: Poor contracting and limited disclosure exposes your company and individual fiduciaries to legal liability.
- Overpayment: Unfavorable contract terms could mean millions in wasted dollars.
- Benefits: Higher premiums and out of pocket expenses result in lower employee satisfaction.
Bad contracts don’t just increase costs—they violate fiduciary duty, expose your company to legal risks, and erode employee trust.
Next Steps
- Review existing contracts: Use the checklist above.
- Push for transparency: Send suggested language to your vendors.
- Get expert guidance: Increase your level of negotiating leverage.
Remember: Taking proactive steps and leaning on DoL regulations and guidance will help secure better contract terms.
Don’t be a bystander. Change the status quo and reap the benefits of The Health Plan Compliance Advantage.
Act now by scheduling a consultation to protect your organization and unlock the full value of your health plan.
