Background
On Feb. 3, 2026, President Donald Trump signed into law the Consolidated Appropriations Act, 2026 (CAA 2026), a sweeping piece of legislation including provisions that will substantially impact employer-sponsored health plans. Among other items, CAA 2026 tackles pharmacy benefit manager (PBM) drug pricing practices and compensation structures, areas that have long raised concerns due to a lack of transparency. More specifically, the new law requires PBM reporting, contractual protections and employee notices. It also makes noteworthy changes to ERISA’s fiduciary prohibited transaction framework, as applied to employer health plans.
Effective Date
For employer health plans with a calendar-year plan year, CAA 2026’s PBM-related provisions generally take effect Jan. 1, 2029. For employer health plans with a non-calendar plan year, the provisions take effect starting with the first plan year that begins on or after the date that is 30 months after Feb. 3, 2026. For example, the effective date for an employer health plan with a July 1 plan year would be July 1, 2029.
Key PBM-Related Changes
- PBM Reporting
- What Changed: PBMs will be required to provide detailed, drug-level reporting for certain group health plans, including information on pricing, rebates, fees and pharmacy compensation. Additionally, PBMs must furnish plan-level summary reports to all group health plans to support oversight, decision-making and participant disclosures.
- Practical Impact: These requirements will give employers unprecedented visibility into critical PBM information that may help contain rising health care costs. However, increased access to information also brings greater responsibility. Employers must ensure that PBMs provide the required information and that the information is prudently reviewed and acted upon once received. In addition, the expanded disclosure obligations may lead PBMs to increase their administrative fees.
- Contractual Protections
- What Changed: As discussed above, PBMs must report extensive information. To ensure that PBMs provide this information, the contractual protections in CAA 2026 prohibit PBMs from limiting the information they are required to disclose and prohibit plans from entering into PBM contracts unless the PBM agrees to provide all required information.
- Practical Impact: Future PBM contracts or renewals will likely include new provisions because of these changes, which employers must carefully review for compliance purposes.
- Employee Notices
- What Changed: Each year, group health plans must provide participants with a notice regarding PBM reporting obligations. This notice may be included in existing plan documents or provided as a stand-alone disclosure. Upon request, participants may also obtain specific claims-level information.
- Practical Impact: Employers will have one additional piece of information to report to participants and must determine whether the information should be added to an existing document or provided through a stand-alone notice if a template is published.
- ERISA Amendments
- What Changed: CAA 2026 also amends ERISA as it applies to group health plans. Specifically, it makes the following changes: (1) requires pass-through compensation, under which PBMs must provide all discounts, rebates and other revenue to the plan sponsor and are compensated through administrative fees; (2) permits group health plans to audit PBM records annually; and (3) requires PBMs to disclose all direct and indirect compensation they receive.
- Practical Impact: By expanding PBM transparency and audit rights, these ERISA amendments provide employers with greater access to information, which in turn increases employers’ obligation to actively monitor PBM arrangements and document prudent oversight. In addition, the mandatory pass-through compensation requirement heightens fiduciary responsibility to ensure that amounts paid by PBMs are properly received, allocated and handled in accordance with plan terms and ERISA.
Employer Takeaways — For Now
CAA 2026 introduces substantial changes that employers must carefully consider. The CAA 2026 directs the Departments of Labor, Treasury and Health and Human Services to issue implementing regulations for the PBM-related provisions within 18 months of enactment. Those regulations will provide needed detail on compliance obligations and enforcement. In the meantime, employers should begin familiarizing themselves with the new requirements and consider whether changes to plan governance, vendor oversight and fiduciary responsibilities may be warranted to address the PBM-related provisions.
