Michelle Webb

Then I asked for a simplified version of the above : Here it is in plain English. Denver hired UnitedHealthcare to run its employee health plan. Denver pays the actual medical and drug bills itself — United just processes them. That’s what “self-funded” means. The problem is that Denver can’t see what it’s actually paying for drugs. 1. United buys the drug for one price and charges Denver a different price. It keeps the difference. Say the pharmacy gets paid $40 for a prescription. United bills Denver $100. United keeps $60. Denver never sees the $40. The contract says this out loud in three different places — it’s not hidden, it’s just written in language nobody reads. There’s no cap on how big that gap can be. 2. Drug companies pay rebates. United keeps all of them and hands Denver a flat number instead. United collects rebate checks from drug manufacturers. Instead of passing those through, it promises Denver a fixed amount per brand prescription (about $740 in 2023). If the actual rebate was $1,500, United keeps the extra $760. The contract literally says any rebates above the fixed amount belong to United. Denver has no right to know what the real number was. 3. United decides which drugs are “specialty” — and specialty drugs are where the money is. The contract defines a specialty drug as, essentially, “whatever United’s own specialty pharmacy sells.” United also reserves the right to reclassify drugs whenever it wants. Once a drug is labeled specialty and filled at United’s own pharmacy, it drops out of the normal price guarantees entirely. So the most expensive drugs are the least protected. 4. The most expensive drugs of all — the ones given in a doctor’s office or infusion center — have no price guarantee at all. The contract flatly excludes them. Cancer drugs, infusions, injections administered by a provider. Zero pricing protection. 5. Denver can’t shop around, and it can’t leave without a penalty. Denver isn’t allowed to negotiate directly with any drug manufacturer. It must use United’s mail-order pharmacy exclusively. And if Denver hires an outside vendor that steers employees to cheaper drugs or cheaper pharmacies, United can cancel all the pricing guarantees. If Denver ends the drug program early, United keeps every rebate it owes. 6. Denver can’t audit its way out of this. Denver is allowed one audit a year, capped at 300 prescriptions, using a random sample United has to approve. No auditors paid on commission. No computer-based searches for errors. You cannot find a pricing problem across hundreds of thousands of claims by randomly checking 300 of them. The audit rules exist to make sure nothing gets found. Is any of it illegal? Almost none of it. It’s a legal contract that Denver signed. The one thing that might cross a line: federal law since 2021 bans “gag clauses” — contract terms that stop an employer from seeing its own cost and claims data. This contract says United may let Denver see its pricing information, at United’s discretion. Federal regulators have said that “only if the vendor allows it” language is exactly what the gag-clause ban prohibits. And Denver has to certify to the government every year that it has no gag clauses in its contracts. The one thing Denver could actually do about it: Colorado banned this drug markup practice, effective January 2025, and self-funded employers like Denver can opt in. It’s an election, not a lawsuit. Somebody should check whether Denver ever filed it. The bottom line for an HR person: the drug program looks free. There’s no fee for it anywhere in the contract. That’s the tell. United isn’t working for free — it’s getting paid out of the drug prices, and the contract is built so Denver can’t measure how much.