LOCKTON'S POV
The shifting political landscape creates new layers of uncertainty
The political and policy environment continues to evolve, introducing new factors that may impact how employers navigate and manage benefit strategies. While no major overhauls to employer-sponsored benefits are expected, there are several active proposals and regulatory efforts to watch in the months ahead.
Stay aware of cost-related proposals
- Tariffs could impact medical cost, either directly on medical devices and supplies or indirectly through increased operating costs for physicians and hospitals. If tariffs are applied to pharmaceuticals, this would directly impact drug costs. If not, the increase in the cost of raw materials could still increase drug costs.
- At the same time, the administration is actively seeking ways to reduce the cost of drugs. A recent study from the Congressional Budget Office found that the most effective way to cut drug costs is to establish a policy saying the U.S. won’t pay more for drugs than other countries. President Trump proposed such a policy in his first term, and several influential people and organizations close to the administration are advocating for it to be resurrected this term.
Monitor efforts to expand transparency
- The administration directed the Department of Labor and others to expand on cost transparency measures passed during Trump’s first term, making it easier to use price data and imposing stricter penalties for plans, providers, and facilities that don’t disclose price information.
- Congress and the administration are actively looking at stricter transparency rules for pharmacy benefit managers (PBMs) and third-party administrators. Additionally, Lockton is encouraging federal officials to adopt policies to stop state-specific PBM legislation that is increasing costs and creating unnecessary administrative burdens for plan sponsors.
How can you navigate pharmacy benefits with confidence?
- No "one size fits all" approaches: Ensure a tailored solution meets your unique needs.
- Transparency is key: Have a full understanding of your contracts, costs, and obligations.
- Data-informed decisions: Leverage pharmacy data analytics and insights to identify opportunities and achieve better outcomes.
Watch for tax changes with plan impact
- Congressional Republicans are focused on a major tax package to prevent a $4.5 trillion tax hike that will go into effect in 2026 if they don’t act by the end of this year. Changes to tax policy could have both a positive and negative impact on benefit plans.
- Several proposals would enhance health savings accounts by allowing high-deductible health plans to offer more first-dollar coverage for things like chronic care, primary care visits, and on-site clinics. Other proposals intend to enhance ICHRAs and other alternative coverage arrangements that could create new opportunities for plan sponsors.
- The most significant risk to benefit plans in tax reform is that Congress could change the way benefits are taxed. While taxing benefits could raise significant revenue for the federal government, doing so would increase the cost of benefits and reduce the quality of coverage. Employers and employees flooded Congressional phone lines to successfully persuade Congress not to tax benefits the last time it was proposed, and should be ready to do the same if a tax on benefits makes it into tax reform legislation.
Track executive orders that could shape compliance
- As executive orders roll out, it’s important to monitor them and address any legal challenges surrounding them. For example, we anticipate a consistent flow of guidance about how employers can comply with executive orders attempting to crack down on what the administration has identified as illegal diversity, equity, and inclusion initiatives. This guidance could have an impact on both company policy and possibly plan design, especially if the employer receives federal funding, is a federal contractor, or is a public company.
Navigating the evolving DEI landscape
Not all executive orders require immediate action by all employers, but subsequent guidance and interpretations of executive agencies could lead to future action items, enforcement activity, and drive private litigation. To navigate the evolving DEI landscape, employers should consider their current policies and practices to confirm alignment with their organizational objectives, identify areas of risk, and consider possible modifications considering political and policy dynamics.
