Committee narrows fiduciary language in bill governing TPAs and PBMs; amendment passes 11-0

The committee adopted an amendment on Senate Bill 3 that narrows a proposed fiduciary standard to third-party administrators (TPAs) and pharmacy benefit managers (PBMs) and requires broader disclosure of fees and contractual arrangements, the chair announced at the committee meeting.

Senate Bill 3 originally proposed a fiduciary duty that would have expressly named plan beneficiaries alongside plan sponsors. Chairman Carball and other members said the adopted change (amendment No. 17) keeps the fiduciary duty between TPAs/PBMs and the employer or plan sponsor, and adds transparency requirements including disclosure of fees, costs and commissions.

The change drew questions from Representative Dan Chester, who said beneficiaries are the people covered by plans and raised concern that removing beneficiaries from the text risks diminishing attention to employee interests. Chairman Carball and Representative Laymon responded that the bill’s framers see the employer as the contracting party with the TPA or PBM and that employers have a duty to their employees when designing plans. "Their fiduciary connection is actually to the employer who is hiring and has the contract with the TPA and the PBM," Chairman Carball said in committee remarks. Representative Laymon said legislative involvement in an employer–employee plan design would be overreaching.

Supporters of the amendment said it is intended to avoid unintended legal relationships between insurers’ vendors and individual plan members while preserving protections for employees through the employer’s duties. The text adopted states that TPAs and PBMs must "act with loyalty and care in the best interest of the plan sponsor" and must "ensure that all fees and costs and commissions are reasonably and fully disclosed" and "maintain transparency in all financial and contractual arrangements related to the plan sponsor's health insurance coverage, including prescription drug benefits," per the amendment summary provided in committee.

Staff and committee members also discussed whether the state Medicaid program falls under the bill’s definitions. Molly (staff) said Medicaid is not explicitly included and that the bill’s current definition of "plan sponsor" — an employer or organization that offers coverage to employees or members through an insurer or self-funded plan — does not clearly encompass Medicaid or the Family and Social Services Administration (FSSA). Committee members agreed to continue conversations on that question in later stages of the bill process.

After taking the amendment by consent, the committee took a roll-call vote on the amended bill. Representatives recorded as voting "aye" included Representative Campbell, Dan Treaster, Shackleford, Goss Reeves, Lehman, Barrett, Borders, Maguire, Ledbetter, Snow and Carbaugh; two members were noted as "excused". The chair announced: "K. Bill passes 11 to 0, and, we'll keep the conversations going." The committee did not adopt any changes that add beneficiaries directly to the contractual fiduciary obligation.

The committee recorded that the amendment and the chairman’s drafting catch were adopted by consent before the roll-call vote. Members said they would continue to work on clarifying definitions and possible future amendments during second reading and later committee work.

What comes next

Senate Bill 3 will continue through the legislative process with the amendment in place. Committee members said they plan additional discussions on whether and how public programs such as Medicaid and other definitions should be included. No further action was taken on other bills during this portion of the hearing.