May 2025 HR Update

The ACA requires non-grandfathered health plans and issuers to cover recommended preventive services without imposing cost-sharing requirements, such as deductibles, copayments or coinsurance, when in-network providers provide the services. The recommended preventive care services covered by these requirements are:

• Evidence-based items or services with an A or B rating in recommendations of the U.S. Preventive Services Task Force (USPSTF);
• The Advisory Committee on Immunization Practices recommends immunizations for routine use in children, adolescents and adults;
• Evidence-informed preventive care and screenings in guidelines supported by the Health Resources and Services Administration (HRSA) for infants, children and adolescents, and
• HRSA-supported guidelines for women include other evidence-informed preventive care and screenings.

Legal Dispute

In March 2023, the U.S. District Court for the Northern District of Texas struck down a key component of the ACA’s preventive care mandate. The District Court ruled that the preventive care coverage requirements based on an A or B rating by the USPSTF on or after March 23, 2010, the ACA’s enactment date, violate the U.S. Constitution. More specifically, the District Court concluded that members of the USPSTF are “principal” officers of the federal government under the U.S. Constitution’s Appointments Clause and must be nominated by the president and confirmed by the Senate, which was not the case. The USPSTF comprises 16 volunteers with expertise in preventive medicine and primary care who serve four-year terms and operate under the U.S. Department of Health and Human Services.

The District Court also issued a nationwide injunction, prohibiting the federal government from enforcing the affected preventive care mandates against any health plans or issuers. The Biden administration appealed the District Court’s ruling to the 5th Circuit covering Texas, Louisiana and Mississippi. The 5th Circuit put the District Court’s decision on hold pending its verdict, which means health plans and issuers must fully comply with the ACA’s preventive care mandate without interruption. The 5th Circuit agreed with the District Court that the Constitution did not validly appoint the members of the USPSTF. However, the 5th Circuit limited its relief to the plaintiffs in the case and held that there was no basis for a nationwide injunction.

On Jan. 10, 2025, the Supreme Court agreed to hear the ACA’s preventive care mandate challenge during its 2024-25 term. The Trump administration has filed a brief in the case indicating that it will continue to defend the mandate’s constitutionality. A decision by the Supreme Court is expected in June or July of 2025.

Possible Impact of Supreme Court Decision

Suppose the Supreme Court rules in favor of the federal government. In that case, the ACA’s preventive care mandate will remain in effect. Health plans and issuers must continue covering the full range of recommended preventive care services without cost sharing. However, suppose the Court rules that a key component of the ACA’s preventive care mandate is unconstitutional. In that case, employers will want to consult with their issuers or third-party administrators to assess the impact on their health coverage. The effect may not be immediate, as making significant midyear changes to plan coverage is unusual and may trigger a 60-day advance notice requirement to participants. State laws regarding preventive care coverage requirements would also apply to fully insured health plans. In addition, many employers and issuers may decide to continue providing first-dollar coverage for a broad range of preventive care services to help control future spending on preventable chronic conditions.

Case #2: Simplifying the Standard for Filing Prohibited Transaction Claims Against Fiduciaries

On April 17, 2025, the U.S. Supreme Court ruled that employees may challenge their employer’s fee arrangement with a retirement plan service provider under the Employee Retirement Income Security Act (ERISA). In its unanimous decision, the Supreme Court took an employee-friendly view of the statutory text and simplified the requirements for alleging a violation of ERISA’s prohibited transaction rules.

Prohibited Transaction Rules

ERISA establishes strict standards of conduct for plan fiduciaries. One such responsibility is the duty of loyalty, which requires plan fiduciaries to act solely in the interest of the plan’s participants and beneficiaries. ERISA’s prohibited transaction rules supplement the duty of loyalty by categorically barring certain transactions between the plan and a “party in interest,” which includes plan service providers. Significantly, ERISA exempts numerous transactions from its prohibited transaction rules, including contracts with service providers, as long as compensation is reasonable.

Court Case

The plaintiffs were a group of Cornell University employees participating in Cornell’s retirement plans. They alleged that Cornell violated ERISA by causing the retirement plans to engage in prohibited transactions for recordkeeping services. According to the plaintiffs, Cornell paid its service providers more than a reasonable recordkeeping fee charged to participants’ accounts.

The 2nd U.S. Circuit Court of Appeals upheld the dismissal of the plaintiff’s claim, holding that the plaintiffs needed to disprove the applicability of the reasonable compensation exemption to move forward with their lawsuit. On review, the Supreme Court reversed the lower court. The Supreme Court analyzed ERISA’s text and held that plaintiffs can bring a lawsuit simply by alleging that a fiduciary engaged in a prohibited transaction. The Supreme Court ruled that the defendant fiduciary has the burden of proving that an exemption applies (rather than requiring the plaintiff to disprove the exemption when bringing a claim).

Employer Takeaway

This decision simplifies the standard for filing prohibited transaction claims, possibly leading to more employee lawsuits. The Supreme Court acknowledged Cornell’s concerns that the ruling would encourage meritless litigation and increase costs for plan sponsors. The Court noted that while these are serious concerns, lower courts have ways to screen out meritless claims before cases proceed to the more costly discovery phase.

To help minimize the risk of litigation, employers should periodically review and document their compliance with ERISA’s fiduciary duty requirements, including the prohibited transaction rules. This process should include reviewing service provider compensation to confirm its reasonableness.