PBM Contract Audit: How to Cut Pharmacy Costs in 2026

Pharmacy costs are growing faster than any other line item in employer health plan budgets. Prescription drug spending for employer-sponsored health plans is projected to increase by 11 to 12 percent in 2026, well ahead of the already elevated 9 percent medical trend. The primary drivers are GLP-1 medications, specialty drugs, and rising prescription utilization. What many employers do not realize is that the contract governing how their health plan purchases those medications may be making the problem worse. Most mid-size employers have never reviewed that contract.

A pharmacy benefit manager, or PBM, serves as the intermediary between your health plan and the pharmacy supply chain. PBMs negotiate pricing with drug manufacturers and pharmacy networks, manage formularies, and process prescription drug claims. They also generate significant revenue through rebates, spread pricing, administrative fees, and other contract provisions that are not always transparent to employer plan sponsors. In 2026, the difference between what a well-structured PBM contract can deliver and what a typical mid-size employer receives is large enough to have a meaningful impact on renewal costs.

What Most Employers Don’t Know About Their PBM Arrangement

The majority of mid-size employers receive their pharmacy benefit through their medical carrier, bundled into the health plan without a separate PBM contract review. That arrangement is convenient. It is also the structure least likely to deliver strong value for the employer.

Rebates, discounts negotiated between the PBM and drug manufacturers, are one of the largest variables in pharmacy plan economics. In a rebate pass-through model, the full rebate value flows to the employer plan. In a rebate retention model, the PBM keeps a portion or all of the rebate and passes only a contracted amount back to the plan. Most bundled carrier arrangements use some form of retention. According to the International Foundation of Employee Benefit Plans, employers who actively manage their pharmacy benefit through separate carve-out or transparent PBM arrangements consistently achieve better cost outcomes than those who rely on bundled carrier arrangements.

Spread pricing is a related mechanism. A PBM charges the employer plan one amount for a prescription and reimburses the pharmacy a lower amount, keeping the spread as margin. In transparent or pass-through contracts, the employer pays only what the pharmacy is actually reimbursed. The difference between these two structures can be significant at scale.

The Three Levers Most Employers Are Not Pulling

A pharmacy management review before your next renewal should focus on three core areas: rebate transparency (request a full rebate reporting breakdown), formulary performance (a formulary designed around your population’s actual prescription patterns, not the PBM’s preferred manufacturer relationships), and audit rights (a properly structured PBM contract includes the right for the employer to audit claims data and PBM performance). Using data analytics to run a pharmacy claims review before your renewal gives you the baseline to evaluate whether your current PBM arrangement is actually delivering competitive value or whether a carve-out, renegotiation, or vendor change is worth modeling.

Ready to take a hard look at your pharmacy benefit before the next renewal drives the conversation? The team at Tooher-Ferraris has been helping employers control health plan costs since 1932. Contact us today to schedule a no-obligation consultation.

Employee Benefits

July 13, 2026

Benchmarking Your Benefits: How to Use Data to Negotiate From a Position of Strength at Renewal

Picture the scene: your broker presents the renewal. The carrier is proposing a 9 or 10 percent increase. You push back. The carrier says it is in line with industry trend. Your broker negotiates a point or two off the top. You accept something in the 7 to 8 percent range, regroup, and move on.

That conversation happens in thousands of mid-size employers every year. What is missing from most of them is data and without data, the employer is negotiating from a position of weakness, hoping for mercy rather than leveraging market evidence to demand better terms. July, for employers with January 1 renewal dates, is exactly the right moment to start building the data case that changes that dynamic at renewal.

Why the Timing of This Work Matters

Renewal preparation is not a November conversation. By November, your claims data is baked, your carrier’s number is nearly fixed, and your options for meaningful design changes are limited. The employers who negotiate most effectively start the benchmarking and analytics work in mid-year, when they still have time to use what they find.

According to Aon’s 2026 health benefits analysis, employers who make no changes to their current plans are projected to see health care cost increases approaching 9.5 percent on average. Employers who actively manage plan design, vendor relationships, and employee cost-sharing consistently achieve lower effective trend, not because they cut benefits, but because they make changes based on what their data actually shows rather than accepting the renewal as presented.

Mid-year benchmarking accomplishes two things before the renewal conversation begins. It tells you exactly where your plan sits relative to comparable employers so you can walk into the renewal knowing whether the carrier’s proposed increase is defensible or inflated. It also surfaces design opportunities: changes to cost-sharing, plan structure, or supplemental offerings that can improve the employer’s financial position without reducing the benefits employees value.

What the Benchmarking Process Actually Looks Like

A structured benefits strategy benchmarking engagement typically involves three layers of analysis: plan design comparison (how your deductibles, out-of-pocket maximums, coinsurance levels, and network tiers compare to peer employers); premium and cost-sharing comparison (what employers in your segment charge employees for coverage — KFF data shows employers covering an average of 73% of family premium, and deviating significantly above employee contribution norms creates a retention gap that rarely surfaces until exit interviews); and claims data analysis (a review of actual utilization patterns to identify cost drivers and populations where targeted intervention could reduce spend). Your data analytics program should be generating this picture continuously, not only when renewal pressure arrives.

How Data Becomes Leverage

When you walk into a renewal negotiation with a benchmarking report showing your plan is already above market on employee cost-sharing, a claims analysis showing that your utilization trend is below average, and a comparison demonstrating that your current design is more expensive than comparable plans the negotiation changes. The carrier’s proposed increase needs to be justified against evidence, not accepted on trend.

That is what negotiating from a position of strength actually means. It is not about being aggressive. It is about knowing the numbers well enough that the other side cannot use your ignorance of them against you.

Ready to build the data case for your next renewal before the window closes? The team at Tooher-Ferraris has been helping employers negotiate from a position of strength since 1932. Contact us today to schedule a no-obligation consultation.

Employee Benefits

July 9, 2026

The Mental Health Parity Rule Has Real Teeth in 2026. Is Your Health Plan Ready?

Most group health plans are out of compliance with the Mental Health Parity and Addiction Equity Act and most employers who sponsor those plans don’t know it.

That is not a provocative claim. It is the conclusion drawn from years of Department of Labor enforcement data, and it is precisely why federal regulators issued a strengthened final rule in 2024 with explicit 2026 compliance requirements. The DOL is now actively issuing enforcement letters. Audits are underway. The plans most at risk are mid-size employer-sponsored group health plans, exactly the ones where HR is often managing compliance alone, without dedicated legal counsel reviewing plan design.

July is Minority Mental Health Awareness Month, and the timing is a useful reminder: the mental health parity rule is not an aspirational policy. It is a federal compliance obligation with real enforcement consequences, and the gap between what most employer plans promise and what they actually deliver is closing on the government’s terms.

What the Rule Actually Requires

The Mental Health Parity and Addiction Equity Act has been on the books since 2008, but meaningful enforcement was limited for most of that period. The Consolidated Appropriations Act of 2021 changed that trajectory by requiring group health plans to perform, document, and make available a Non-Quantitative Treatment Limitation comparative analysis, commonly called an NQTL analysis, demonstrating that mental health and substance use disorder benefits are not treated more restrictively than medical and surgical benefits.

In plain terms: if your plan requires prior authorization for inpatient psychiatric care, it must apply equivalent prior authorization logic to inpatient medical and surgical care. If your plan uses step therapy protocols before covering certain mental health medications, comparable requirements must govern medical treatments. Network composition standards for behavioral health providers, out-of-network reimbursement rates for mental health services, and care management criteria are all subject to parity analysis.

The 2024 final rule, with 2026 compliance deadlines for most plan provisions, goes further: plans cannot simply assert compliance, they must produce a written, documented analysis and make it available to regulators and plan participants on request. According to the Department of Labor, the vast majority of NQTL analyses reviewed in enforcement actions to date have been found deficient.

Why Mid-Size Employers Face the Greatest Exposure

Large employers with dedicated benefits teams and legal counsel have, in many cases, worked through the NQTL analysis process. Mid-size employers with 25 to 500 employees are significantly more likely to have assumed their carrier or TPA manages compliance, and in many cases, that assumption is wrong.

For self-funded and level-funded plans, the compliance obligation belongs to the plan sponsor (the employer), not the carrier. For fully insured plans, the carrier bears primary responsibility, but the employer remains liable for deficient plan design. Either way, the employer is not insulated by pointing at the carrier.

According to Spring Health’s 2026 Workplace Mental Health Report, 69% of employees say mental health benefits play a vital role in their job decisions, a figure that rises to 83% among workers ages 18 to 34. Mental health has also appeared for the first time among the top conditions driving employer healthcare costs, according to UnitedHealthcare’s 2026 employer benefits analysis. Compliance failure is not only a legal risk, it is a benefits quality issue that affects the employees a health plan is supposed to protect.

What HR Leaders Should Do Before the Next Renewal

Start with your carrier or TPA. Ask specifically whether an NQTL analysis has been completed for your plan and whether it is documented and available for review. A vague answer is itself informative. Engage your benefits broker on a formal HR compliance review to identify which plan design features are most likely to generate parity scrutiny. An employee benefits strategy review conducted now gives employers enough runway to address gaps before plan year renewal. July is the right moment: the design is still open, and the documentation burden is manageable before the compliance window tightens further.

Ready to make sure your health plan is on the right side of the mental health parity rule? The team at Tooher-Ferraris has been helping employers navigate benefits compliance since 1932. Contact us today to schedule a no-obligation consultation.

Business Insurance

July 3, 2026

Your Tools Are on Three Job Sites. Are They Actually Insured?

Your commercial property policy covers your building. Your general liability covers third-party bodily injury and property damage. What covers the $80,000 excavator parked at a job site three towns over?

For many contractors, the honest answer is: nothing.

Construction is a mobile industry. Tools travel between job sites, equipment gets staged at temporary locations, materials sit on flatbeds overnight, and rented machinery moves in and out of projects daily. Standard commercial property policies are built around fixed locations, and they typically do not follow your assets when they leave the building. That gap is an inland marine exposure, and closing it is one of the most overlooked steps in a contractor’s insurance program.

What Standard Property Policies Don’t Cover

Commercial property insurance is designed to protect assets at a scheduled location — your office, your yard, your warehouse. When equipment leaves that location, most standard policies either exclude coverage entirely or impose sub-limits that bear no relationship to actual replacement costs.

The gaps vary by policy, but contractors commonly find that standard commercial property coverage does not adequately protect tools and equipment stored at or transported to temporary job sites, equipment in transit between locations, rented or leased machinery the contractor is responsible for under contract, materials stored off-premises awaiting delivery, or mobile equipment like compressors, generators, and forklifts that move regularly.

This is not a fringe concern. According to the National Equipment Register, construction equipment theft costs the US industry an estimated $400 million annually, and those losses disproportionately impact small and mid-sized contractors who cannot absorb a six-figure replacement without disrupting active projects. According to Gallagher’s 2026 market outlook, construction-related replacement costs remain 15 to 20% above pre-pandemic levels — which means a piece of equipment stolen or destroyed today costs significantly more to replace than the value on your current schedule.

What Inland Marine Insurance Actually Does

Despite its name, inland marine has nothing to do with water. The term originates from the insurance industry’s historical distinction between ocean cargo and goods transported over land. For contractors, an inland marine policy — often called a contractor’s equipment floater — is specifically designed to protect property that moves.

Coverage typically includes owned tools and equipment wherever they are located, whether on a job site, in transit, or at a storage facility. High-value scheduled items like cranes, excavators, and lifts can be listed individually with agreed value coverage. Blanket limits cover unscheduled tools and small equipment up to a per-item and aggregate cap. Equipment you rent or borrow and are contractually responsible for can also be included, as can technology tools used in the field.

Coverage terms vary significantly by policy, so reviewing the specific causes of loss, deductibles, and any exclusions for unattended equipment is essential. Many policies, for instance, exclude theft from an unattended vehicle unless there is visible evidence of forced entry — a detail that surfaces at claim time in ways contractors do not anticipate.

The Right Time to Review Is Before You Need It

The specialty programs available to contractors in 2026 include highly competitive inland marine options, even for accounts with prior claims. An inland marine review should include a current equipment inventory compared against your commercial insurance policy schedule, a check on rented equipment obligations and whether they’re covered, and a look at transit exposures for materials and tools in transit between sites. OSHA’s ongoing emphasis on jobsite safety equipment standards is a timely reminder that the tools enabling compliance with those standards need their own protection when they are off your property.

Ready to make sure your tools and equipment are actually covered everywhere your business operates? The team at Tooher-Ferraris has been helping contractors protect their assets since 1932. Contact us today to schedule a no-obligation consultation.

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Your PBM Contract Is Probably Costing You More Than It Should – Here’s What to Do About It