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New DOL Rules Allow Employers to See What Their PBMs Earn

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For years, employers have paid pharmacy benefit managers to hold down prescription drug costs without being able to see how much those PBMs were earning along the way. A new federal rule is meant to change that. The Department of Labor’s Employee Benefits Security Administration released a final regulation on October 29, 2026, and published it in the Federal Register on November 2. It requires PBMs, along with brokers and consultants affiliated with them, to disclose in dollars the rebates, fees, markups and other compensation they collect when serving large self-insured employer health plans. Whether the rule actually lowers drug spending will depend on what employers do with that information.

Why did PBMs become a lightning rod. PBMs sit in the middle of the prescription drug supply chain. They negotiate rebates from drug manufacturers, build formularies, set up pharmacy networks and process claims for health plans. According to the Labor Department, the self-insured employer plans they serve cover about 90 million Americans. The industry is highly concentrated: CVS Caremark, Cigna’s Express Scripts and UnitedHealth’s Optum Rx handle roughly 80 percent of U.S. prescriptions. Each is also part of a company that owns insurers and pharmacies.

Critics say those arrangements produce conflicts of interest. When a PBM’s revenue rises with the size of the rebates it negotiates, it may prefer drugs with high list prices and big rebates over cheaper alternatives. “Spread pricing” lets a PBM bill a plan more for a drug than it pays the pharmacy and keep the difference. PBMs can also steer patients to pharmacies they own. A January 2025 Federal Trade Commission staff report found that pharmacies affiliated with the three largest PBMs earned more than $7.3 billion above estimated acquisition costs on specialty generic drugs from 2017 through 2022. Those drugs included medications for cancer and HIV. The PBM industry rejects these criticisms and maintains that its negotiating power lowers net drug costs for plans and patients.

What has been done so far. Reform has moved slowly. Congressional packages stalled repeatedly, including a bipartisan deal stripped from a year-end spending bill in December 2024. In the meantime, states passed their own laws, but federal courts have often blocked them. Arkansas’s first-in-the-nation ban on PBMs owning pharmacies was put on hold in Express Scripts, Inc. v. Richmond (E.D. Ark. July 28, 2025), No. 4:25-cv-00520. The district court found the law likely violates the Commerce Clause and is likely preempted by federal law governing TRICARE. Arkansas appealed, and the Eighth Circuit heard argument on September 22, 2026. A ruling is still pending. Separately, in Flowers v. Caremark PCS Health (8th Cir. June 29, 2026), No. 25-3068, the Eighth Circuit held that ERISA preempts Arkansas’s requirements for how close network pharmacies must be to patients. That decision narrows how far states can regulate PBMs that serve employer plans.

At the federal level, the pace finally picked up this year. In April 2025, President Trump signed an executive order directing the Labor Department to write PBM disclosure rules, and the department proposed them in January 2026. On February 3, 2026, Congress enacted PBM reforms in the Consolidated Appropriations Act, 2026. Beginning in 2028, the law ties PBM pay in Medicare Part D to flat service fees rather than drug prices or rebates. For employer plans, it confirms that PBMs must disclose their compensation under ERISA. It also requires PBMs to pass 100 percent of rebates and similar payments through to ERISA plans for plan years beginning on or after August 3, 2028. Meanwhile, the FTC’s 2024 lawsuit accusing the three largest PBMs of inflating insulin prices has largely ended in settlements. Express Scripts settled in February and Caremark in July, and a proposed settlement with Optum Rx is under review. All three PBMs denied the FTC’s allegations.

Much of this is still on paper. The major federal changes do not take effect until 2027 through 2029, so employers and patients have not yet felt most of the effects.

What the new rule requires.The final rule is built on ERISA section 408(b)(2). That provision lets a plan pay a service provider only if the arrangement is reasonable and the compensation is no more than reasonable. It applies to self-insured plans of employers that averaged at least 100 employees in the prior year, and to similarly sized multiemployer plans, where a PBM expects at least $1,000 in compensation. According to an analysis by Mayer Brown, fully insured plans are excluded from the detailed requirements. So are plans sponsored by drug manufacturers, wholesalers or PBMs.

Before a contract is signed or renewed, a PBM must disclose its direct fees and the manufacturer rebates it expects, broken out drug by drug and showing how much it keeps versus passes through. It must also disclose spread compensation by drug and dispensing channel, money clawed back from pharmacies, formulary incentives, payments due on termination and the net price per fill. After that, it must report what it actually received every six months, or quarterly if the plan asks, within 30 days after each period ends. Any category that exceeds the estimate by 5 percent or more must be explained. Plans also get an annual audit right using an auditor of their choosing. The PBM must produce the data within 60 days, at its own expense.

The consequences fall on both sides. If a PBM fails to comply, the arrangement becomes a prohibited transaction under ERISA. The PBM faces civil penalties, and the plan’s fiduciaries are protected only if they follow the rule’s steps for requesting the missing information, reporting the failure to the Labor Department and deciding whether to keep the PBM. The rule takes effect January 4, 2027, and applies to plan years beginning on or after July 1, 2027. For calendar-year plans, that means January 1, 2028.

What difference it might make. The Labor Department estimates the rule could lower drug costs for plans and participants by as much as $22 billion over 10 years. Labor Secretary Keith Sonderling called it “a win for every American worker.” Community pharmacists, through the National Community Pharmacists Association, applauded the rule. A bipartisan group of 45 state attorneys general had backed the proposal. The industry sees it differently. The Pharmaceutical Care Management Association, which represents PBMs, argued that the rule duplicates the 2026 law and will burden smaller PBMs. PCMA President David Marin said detailed “pharmacy-by-pharmacy transparency is already law.” In its comments on the proposal, the group pointed to the Supreme Court’s 2024 decision limiting deference to agency interpretations, which suggests a court challenge is possible.

The rule’s limits are significant. It does not set drug prices, cap PBM fees or by itself require PBMs to pass savings through; that pass-through comes from the 2026 law in 2028. Small employers and fully insured plans fall outside its detailed requirements. Because the rule applies only to ERISA group health plans, it does not reach workers’ compensation pharmacy costs, which are governed by state law.

For covered employers, the rule offers leverage and creates new duties. Plan sponsors will be able to compare PBM bids on actual dollars instead of advertised rebate guarantees. They will also be expected to review the disclosures, follow up when information is missing and document their conclusions. Benefits attorneys are already advising clients to build at least 90 days into renewals to receive the initial disclosures, and to negotiate audit and termination rights now. The rule gives employers the information. Whether costs come down depends on whether they use it.

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FRISS Survey: Insurers See AI Fraud Coming but Few Are Ready

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Insurance fraud is splitting into two different problems, and most insurers are not yet equipped for the more dangerous one. That is the central argument of The State of Insurance Fraud 2026, a survey-based report from fraud-detection software provider FRISS. Rather than issue one report, the company has released it in four chapters between late August and early November 2026. The final installment, on industry collaboration, appeared November 4.

FRISS surveyed fraud practitioners across the insurance industry, but the published chapters do not say how many people responded, where they work or when the survey was fielded. Several charts also contain totals that do not add up to 100 percent. The figures below are best read as a directional snapshot of what fraud professionals are seeing, not as precise measurements. FRISS sells the kinds of detection and data-sharing tools the report recommends.

The first chapter describes the current fraud landscape. Auto insurance dominates: 71 percent of respondents named it their primary fraud challenge, compared with 16 percent for property and general lines and 11 percent for commercial lines. The most common scheme is still the ordinary one. Forty-four percent cited opportunistic exaggeration of legitimate claims, and 29 percent cited fake injury claims. Organized crime (13 percent) and rate evasion (9 percent) followed.

Asked what will drive fraud over the next two years, respondents most often pointed to economic and cost-of-living pressure (67 percent). Advances in fraud technology (60 percent) and organized fraud rings (58 percent) were close behind. A majority, 58 percent, said schemes have grown in volume or complexity. FRISS reads these results as two separate threats. One is high-volume opportunistic fraud that rises with financial stress. The other is a smaller but more sophisticated tier of organized, technology-enabled schemes. FRISS says no single strategy handles both.

The second chapter examines how far insurers have gotten with their own AI defenses. The answer is not very far. Only 9 percent of respondents said AI-based fraud detection is fully implemented. Another 36 percent are piloting or partially deployed, 36 percent are still planning and 19 percent have no plans. The most-cited barriers were budget constraints (29 percent) and data quality (27 percent), followed by lack of internal buy-in (18 percent) and regulatory or privacy concerns (16 percent). The most widely used tools are still traditional ones: automated red flags and business rules, and cross-checks against external databases, each used by 60 percent. Among adopters, 70 percent said AI has sped up fraud detection. FRISS argues the gap is organizational rather than technical, and that planning alone offers no protection.

The third chapter turns to how criminals are expected to use AI. Practitioners most often expect synthetic documents or identities (76 percent) and deepfake photos, audio or video (71 percent). Fewer cited automated large-scale application fraud (44 percent) and AI-coordinated fraud networks (33 percent). Fifty-eight percent expect deepfakes to become the dominant fraud tool in the near term. Yet only 20 percent treat document and media verification as a critical operational priority.

The chapter’s most striking finding concerns “agentic” AI, meaning software that can carry out multi-step tasks on its own instead of waiting for human direction at each step. Seventy-eight percent of respondents said such systems are somewhat or very likely to influence insurance fraud within two years. Just 2 percent said their organization is very well prepared for that.

The final chapter, also published by Insurance-Canada.ca, argues that no single insurer can keep up on its own. Sharing fraud data and alerts across insurers was the most popular form of cooperation, at 76 percent. Respondents also favored joint investigative task forces (56 percent), public-private partnerships with regulators and law enforcement (51 percent), partnerships with insurtech vendors (40 percent) and international cooperation (29 percent). Budget and resource limits (27 percent) and keeping pace with evolving tactics (24 percent) topped the list of obstacles. FRISS concludes that the industry needs a shared fraud-intelligence layer as basic infrastructure. It also warns that insurers whose internal data is in poor shape will have little to contribute to such a network.

The FRISS findings echo Verisk’s State of Insurance Fraud Study from earlier this year, which surveyed U.S. consumers and claims professionals. Both point to the same tension. AI tools are making fabricated photos and documents easy to produce. Insurers widely recognize the threat, but far fewer feel confident they can catch it, and both reports call for cross-carrier data sharing. Neither report breaks out workers’ compensation. Still, the forecasts about synthetic documents, deepfaked evidence and fake injury claims apply as much to medical reports, wage records and injury photos as to auto and property claims.

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November 2, 2026 – News Podcast

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Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: Supreme Ct Sends City of Salinas Case Back for Ct. of Appeal Review. Busy Schedule No Defense to State Fund Premium Audit Suit. Court Limits Attorney Client Privilege in Fair Chance Act Investigation. L.A. Takedown Charges 15 in $2B Health Insurance Fraud Schemes. SB574 – California is First State to Pass AI Rules for Lawyers. DOI Announces Insurance Long-Term Solvency Planning Regulation. 75% CTE Rate in Post Mortem Study of 2,362 of Former NFL Players. 340B Contract Pharmacy Drug Discount Controversy Intensifies.

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FBI Most Wanted Healthcare Fraud Fugitive to Serve 20 Years

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Herbert “Herb” Kimble, the Chicago call-center operator whom federal prosecutors describe as a central architect of one of the largest Medicare fraud schemes on record, will spend 20 years in federal prison. That sentence comes nearly two years after he skipped his original sentencing and fled to the Philippines. According to an October 26, 2026 announcement from the U.S. Attorney’s Office, a federal judge sentenced 60 year old Kimble to 240 months in prison followed by three years of supervised release. There is no parole in the federal system. The court also ordered him to pay more than $199 million in restitution to Medicare and to forfeit more than $195 million in money and property.

According to the Justice Department, Kimble ran offshore call centers that used deceptive advertising to recruit Medicare beneficiaries, many of them elderly, and persuade them they needed orthotic back, shoulder, wrist and knee braces. Telemedicine companies then supplied signed doctors’ orders, often for braces that had been chosen in advance. Prosecutors say the doctors and other practitioners rarely conducted a real consultation. Kimble’s operation sold the beneficiaries’ information and the signed orders to durable medical equipment (DME) suppliers, which shipped the braces and billed Medicare. The suppliers paid kickbacks dressed up as ordinary business payments. The HHS Office of Inspector General’s fugitive profile adds detail: from about 2014 to April 2019, callers responding to TV and internet ads for pain braces were screened, talked into a brace and often upsold on more. The invoices the call center sent to DME companies were written to hide the fact that they were buying prescriptions.

The sentencing announcement says the scheme billed Medicare more than $365 million in fraudulent claims, of which Medicare paid more than $199 million. Prosecutors say Kimble personally pocketed more than $195 million and used part of it to buy a luxury condominium at the Shangri-La hotel in the Philippines. Larger figures appear elsewhere because they measure different things. HHS-OIG says the DME companies that bought prescriptions from Kimble’s call center caused more than $1.2 billion in Medicare charges, the same headline figure attached to the broader 2019 investigation.

Kimble’s case grew out of Operation Brace Yourself, an April 2019 Justice Department crackdown that charged 24 defendants. They included executives of five telemedicine companies, owners of DME companies and three licensed medical professionals, in a scheme the department tied to more than $1.2 billion in losses. At the same time, the Centers for Medicare & Medicaid Services took administrative action against 130 DME companies that had billed Medicare more than $1.7 billion. KFF Health News later reported how the schemes looked from the beneficiary’s side. One elderly man was billed for 10 braces from four suppliers, prescribed by four practitioners he had never spoken to.

Kimble pleaded guilty in 2019 to conspiracy against the United States under 18 U.S.C. § 371. The conspiracy’s objects included health care fraud and violations of the federal Anti-Kickback Statute. He then spent years cooperating against co-conspirators, according to HHS-OIG.

That cooperation ended in the fall of 2024, when Kimble failed to appear at three scheduled court proceedings, including two sentencing hearings, and a bench warrant was issued. He resurfaced on June 4, 2026, as one of eight fugitives on the FBI’s newly launched Most Wanted Fraudsters list. Within days he was in custody. The Philippine Bureau of Immigration said its Fugitive Search Unit arrested him in Pasig City, part of Metro Manila, and deported him, permanently barring him from re-entering the country (Daily Tribune). He was then indicted on three counts of failure to appear under 18 U.S.C. § 3146. That case was folded into the Justice Department’s 2026 National Health Care Fraud Takedown, which charged 455 defendants in connection with more than $6.5 billion in alleged fraud.

On August 11, 2026, Kimble entered a new plea agreement covering both the 2019 conspiracy and the failure-to-appear counts. Under the deal, according to IRS Criminal Investigation, both sides agreed the court should impose 15 to 20 years, and Kimble agreed to pay nearly $200 million in restitution, including $9 million at sentencing. Judge Anderson imposed the top of that range.

U.S. Attorney Bryan Stirling called the case one of the largest international health care fraud schemes in the nation’s history. Colin M. McDonald, who leads the Justice Department’s new National Fraud Enforcement Division, said “fleeing overseas won’t spare healthcare fraudsters” from prosecution. HHS-OIG Special Agent in Charge Kelly Blackmon said Kimble exploited Medicare beneficiaries to generate hundreds of millions of dollars in false claims. Officials from the FBI’s Columbia field office and IRS-CI’s Charlotte field office also commented. The administration has presented the case as an early success for the White House Task Force to Eliminate Fraud, chaired by Vice President JD Vance, and for the FBI’s fraudster list. The case was investigated by the FBI, HHS-OIG and IRS-CI and prosecuted by Assistant U.S. Attorney Samantha Usher.

The Kimble prosecution involved only Medicare claims, and the announcement names no other payers. But the business model behind it has turned up repeatedly in later federal enforcement waves: harvest patient leads at scale, buy telemedicine prescriptions without real exams, and route the orders to suppliers willing to pay per referral. Those waves have reached genetic testing, topical pain creams and other DME. For workers’ compensation carriers, self-insured employers and group health plans, the pattern is a familiar set of red flags. They include out-of-area prescribers who never examined the patient, clusters of identical brace or device orders, suppliers with no local footprint, and patients who say they never asked for the equipment.

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Meloxicam Drives Surge in Comp Anti-Inflammatory Spending,

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An inexpensive, once-a-day arthritis pill has quietly become the biggest anti-inflammatory drug expense in California workers’ compensation, and nearly all of the increase traces to a handful of specialty capsules. In a November 3, 2026 release, the California Workers’ Compensation Institute (CWCI) reported that meloxicam’s share of anti-inflammatory drug spending in the state’s comp system rose from 1.7 percent in 2020 to 30.8 percent in 2025. Over the same period, its share of anti-inflammatory prescriptions grew much more slowly, from 10.3 percent to 14.7 percent.

The gap shows up most clearly in the average payment per prescription. According to CWCI, it climbed every year, from $9 in 2020 to $13 in 2021, $30 in 2022, $41 in 2023, $63 in 2024 and $92 in 2025. Yet most meloxicam prescriptions remain cheap: in 2025 the median payment was still under $14, and 56 percent of prescriptions were paid at less than $15. At the other end, 4.7 percent of prescriptions were paid between $500 and $2,287.

CWCI traced that spread to dosage form. When it reviewed the National Drug Codes on 2025 meloxicam prescriptions, it found four high-cost generic 5-mg and 10-mg capsule products, from Lupin Pharmaceuticals or Novitium Pharma and dispensed in quantities of 30 or 60. Those capsules made up 12.6 percent of meloxicam prescriptions but 75.7 percent of meloxicam payments. Conventional 7.5-mg and 15-mg tablets accounted for about 87 percent of prescriptions at about $23 each, but only about 22 percent of spending.

According to CWCI, the capsules use a fine-particle formulation first developed for the brand-name product Vivlodex, which has since been discontinued. The institute points to the FDA-approved labeling, which says the capsules have not shown systemic exposure equivalent to other oral meloxicam and are not interchangeable with them, even at the same milligram strength (see the Vivlodex label on DailyMed). The labeling does not establish any reduction in cardiovascular risk, and the capsules carry the same NSAID warnings as other forms.

The release also flags a regulatory gap. CWCI says the Division of Workers’ Compensation’s Pharmacy and Therapeutics Committee discussed treating the capsules separately from conventional tablets on the MTUS Drug Formulary, and the distinction appeared in 2020 and 2021 draft drug lists. It was not carried into the final published lists. CWCI says the current lists can’t tell the products apart because the RxNorm identifier fields needed to do so are incomplete. Committee members have repeatedly urged DWC to complete those fields, and CWCI expects the issue to come up again at the committee’s January meeting. The release was corrected after publication: an earlier version had said the capsules were already classified as non-exempt. CWCI also cautions that its data cannot establish the clinical rationale for any individual prescription.

How meloxicam became a top seller.  Meloxicam is a nonsteroidal anti-inflammatory drug (NSAID) developed by Boehringer Ingelheim. The FDA approved it in 2000 under the brand name Mobic. Its rise came largely from the downfall of a competitor. After Merck withdrew the COX-2 inhibitor Vioxx in September 2004, a Consumer Reports Best Buy Drugs analysis found that Mobic prescriptions jumped 136 percent in six months, the biggest gain among Vioxx alternatives. Mobic had been heavily advertised as a substitute (The Pharma Letter). Generics then made it cheap: in July 2006 the FDA approved the first generic versions, clearing 13 applications at once under a new “cluster” review process (UPI).

Meloxicam’s pharmacology helps explain why prescribers stayed with it. Its elimination half-life of 15 to 20 hours allows once-daily dosing, according to the FDA-approved tablet label. Pharmacology references also describe it as COX-2 preferential, meaning that at usual doses it leans toward the enzyme behind inflammation. That property has been linked to somewhat less stomach irritation, though it does not remove the drug’s gastrointestinal or cardiovascular risks. Today it is the most-prescribed NSAID in the country. The ClinCalc DrugStats database, which draws on federal survey data, estimates about 20.7 million U.S. prescriptions in 2023, ranking it 27th among all drugs. The low-dose capsule came later. Iroko Pharmaceuticals won FDA approval for Vivlodex in October 2015 and promoted its submicron-particle technology as a way to follow FDA advice to use the lowest effective NSAID dose (Drugs.com).

Meloxicam tablets are approved for the signs and symptoms of osteoarthritis and rheumatoid arthritis, and for juvenile rheumatoid arthritis in patients weighing at least 60 kg. The 5-mg and 10-mg capsules are approved only for osteoarthritis pain. For payers and prescribers, the drug’s appeal is a non-opioid, once-daily anti-inflammatory that costs pennies in generic tablet form.

Like all prescription NSAIDs, meloxicam carries a boxed warning. It raises the risk of serious cardiovascular events, including heart attack and stroke, which can be fatal and can occur early in treatment. It can also cause serious gastrointestinal bleeding, ulcers and perforation, sometimes without warning. The FDA strengthened the cardiovascular warning in 2015, noting that the risk was seen most consistently at higher doses. The tablet label lists diarrhea, upper respiratory infections, indigestion and flu-like symptoms as the most common side effects in trials. It also warns of high blood pressure, heart failure and fluid retention, liver injury, serious skin reactions and anemia.

Kidney risks are the most relevant for long-term users. The tablet label warns that long-term NSAID use can cause kidney tissue damage (renal papillary necrosis), kidney insufficiency and acute kidney failure, and can raise blood potassium. Risk is highest in older patients and in those who already have reduced kidney function, are dehydrated, or have heart failure or liver problems. Patients taking diuretics, ACE inhibitors or angiotensin receptor blockers are also at higher risk. The label advises against using meloxicam in advanced kidney disease unless the benefits clearly outweigh the risk. It caps the dose at 7.5 mg a day for hemodialysis patients and calls for monitoring kidney function in at-risk patients. For the capsules, the Vivlodex label sets a 5-mg maximum for dialysis patients. The research generally supports these cautions. A 2017 systematic review in BMC Nephrology estimated that current NSAID use raised the odds of acute kidney injury by about 73 percent in the general population, with higher risk in older people. A 2019 JAMA Network Open study of more than 760,000 active-duty Army soldiers found that the highest prescribed NSAID doses carried modestly higher risks of acute and chronic kidney disease, even in young and middle-aged adults, although absolute rates were low. In 2020, the FDA also warned against NSAID use at about 20 weeks of pregnancy or later because of rare but serious kidney problems in the unborn baby.

For employers and claims administrators, the CWCI findings point in two directions. On cost, nearly all of the growth in meloxicam spending comes from capsules that the labeling says are not interchangeable with cheap tablets, and the formulary does not yet treat them differently. On safety, long courses of meloxicam in injured workers, particularly older workers and those taking blood pressure medications, call for the kind of kidney monitoring the label already recommends.

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LC 3600(a)(10) Post-Termination Defense Waived if Not Plead in Answer

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Frank Deville worked as a furnace and blast operator for Exide Technologies in Vernon, California, from December 2, 1986 until he was laid off on August 14, 2014. On April 24, 2015, about eight months after the layoff, he filed an application claiming cumulative injury to his nervous, respiratory, skin and internal systems from heat and chemical exposure. Exide’s carrier, Zurich American Insurance Group, administered by Tristar Risk Management, denied the claim on July 13, 2015.

Deville handled most of the case without a lawyer. An attorney represented him from April 2015 to October 2017, and after that he proceeded with a guardian. The guardian barred him from testifying at trial, which ran over several days in 2022. The parties disputed twelve issues. One of them was whether the claim was barred by the post-termination defense of Labor Code § 3600(a)(10). Except for psychiatric injuries, that provision bars compensation for a claim filed after a notice of termination or layoff unless the employee proves one of the statutory exceptions.

In a Findings and Award issued November 22, 2022, the workers’ compensation judge at the Riverside district office found that Deville sustained an industrial cumulative injury limited to sleep, rated at 13 percent permanent disability, with a need for limited future medical care. Relying on the neurology panel QME, the WCJ found no injury to the nervous, respiratory, circulatory, skin or other internal systems. The WCJ also disallowed EDD’s lien and found no unreasonable denial of benefits.

On the post-termination issue, the WCJ ruled that the claim was not barred by § 3600(a)(10). In the opinion on decision, the WCJ found that the defendant had waived the affirmative defense because it never filed an Answer to the application. The judge relied on Labor Code § 5505, which allows evidence on matters not pleaded by answer only on terms the Appeals Board or judge imposes. The WCJ also cited the parallel WCAB rule, Cal. Code Regs., tit. 8, § 10465, which gives the judge discretion over unpleaded matters and affirmative defenses. The WCJ declined to allow the defense in the interest of “substantial justice under the law,” noting that Deville had represented himself, with a guardian, for most of the case.

In the WCAB panel decision of Deville v. Exide Technologies, No. ADJ9932404 (October 2026), the Workers’ Compensation Appeals Board granted the applicant’s petition for reconsideration and, as its decision after reconsideration, affirmed the WCJ’s November 22, 2022 Findings and Award in full. This is a panel decision of the Appeals Board, not a court opinion, and it is not designated a significant panel decision. Panel decisions do not bind other panels or WCJs, though they may be cited as persuasive authority. The decision was signed by Commissioner Craig L. Snellings, with Commissioner Katherine Williams Dodd concurring and Chair Katherine A. Zalewski, and was filed October 22, 2026.

The reconsideration petition came from the applicant, who was challenging the limited scope of his injury and other adverse findings. The Board found his petitions hard to follow and thinly supported by the record. After independently reviewing the evidence, it concluded that the medical reports supported the WCJ. The toxicology and neurology evaluators found that Deville’s lead exposure was below that of the general population, and the psychiatric evaluator questioned psychological testing completed with help from Deville’s wife. Because Deville did not testify, the Board relied on the paper record. The Board declined to consider the applicant’s unsolicited supplemental filings under Cal. Code Regs., tit. 8, § 10964.

The Board did not separately analyze the post-termination ruling, and nothing in the decision indicates that the defendant challenged it on reconsideration. The WCJ’s waiver finding therefore stands as part of the affirmed award. The decision also doesn’t say whether the defendant first raised the defense at the pretrial stage, or what evidence, if any, it offered on notice of layoff.

For defense practitioners, the waiver ruling is the practical lesson. Section 5505 contemplates an answer within 10 days after service of the application, setting out the facts the defendant intends to rely on. Rule 10465 requires the answer to be on the Board’s prescribed form and states that a general denial does not qualify as an answer. A claim denial letter is not a substitute. Here, the layoff came roughly eight months before the application was filed, a timeline that might otherwise have supported the defense. Even so, the defendant’s failure to plead it left its fate to the judge’s discretion, and the judge weighed the applicant’s largely self-represented status against allowing it. Because the rule is discretionary, a WCJ could rule differently on other facts. Still, the safest course is to file a timely Answer that expressly pleads § 3600(a)(10) and every other affirmative defense the defendant intends to pursue.

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WCIRB Reports Medical Care Using New Resource-Based Yardstick

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When the Workers’ Compensation Insurance Rating Bureau of California counts physician care the way it always has, injured workers appear to be getting less of it. When it weighs that care by how much time, skill and expense each service actually demands, the picture flips. That is the central finding of A New Measure of Medical Service Utilization: Physician Services and the Factors Driving Change, a research report the WCIRB released on October 30, 2026. Using its new resource-based yardstick, the bureau estimates that utilization of physician services rose 8 percent from 2020 through 2025. Its traditional measure shows a 5 percent decline over the same period.

The report, written by Lucy Chen, ACAS, and Julia Zhang, PhD, is the first in a planned series on medical service utilization. It starts with physician and non-physician practitioner services, which the WCIRB describes as the largest medical service category in its medical transaction data. The stakes are significant: according to the report, medical costs made up 52 percent of total loss payments in California’s workers’ compensation system in 2025.

Medical costs are driven by price and utilization. Until now, the WCIRB has generally measured utilization as medical transactions per claim (or visits per claim for physical medicine, acupuncture and chiropractic care). Those counts are simple, but they treat a brief office visit and a spinal surgery as equal units of care.

The new measure fixes that by borrowing the relative value units (RVUs) from the Resource-Based Relative Value Scale that Medicare uses to set physician fees. The Division of Workers’ Compensation adopted the RBRVS for the physician services section of the Official Medical Fee Schedule (OMFS) in 2014 (see the DWC’s RBRVS fact sheet). Each procedure carries three RVU components — physician work, practice expense and malpractice expense — and the WCIRB adjusts each with the geographic practice cost index, then multiplies by the number of procedures billed. Services that have no RVU in the fee schedule, such as unlisted procedure codes, anesthesia and California-specific report codes WC001 through WC012, are measured by the quantity of services per claim instead. Services with RVUs accounted for about 86 percent of physician services payments and 83 percent of transactions from 2014 through 2025.

The report illustrates the difference with two hypothetical claims. Three routine office visits for an established patient in Los Angeles add up to about 8.7 utilization units, while a single lumbar laminotomy performed in the Bay Area comes to about 31.6. Under the old transaction count, the office-visit claim would look like the heavier user of care; under the new measure, the surgical claim does.

Applied to WCIRB medical transaction data for services rendered from 2014 through 2025, the two measures tracked each other closely through 2019, with the old measure showing a 12 percent decline and the new measure a 9 percent decline. They diverged beginning in 2020. The WCIRB reads that gap as evidence that the resource intensity of care has been rising even as the raw number of services has fallen. Both measures did show utilization increasing in 2024 and 2025.

The new measure also redraws the line between price and utilization. Over the full 2014–2025 period, physician services cost per claim rose 31 percent under either approach. The original measure splits that into an 11 percent drop in utilization and a 48 percent jump in price per transaction. The new measure attributes it to a 7 percent increase in utilization and a 22 percent increase in price per utilization unit. Under the new measure, prices grew about 2 percent a year, versus about 4 percent under the old one. The report notes that the slower figure lines up better with the roughly 2.2 percent annualized increase in the OMFS conversion factor, which reflects inflationary fee schedule adjustments. In other words, much of what looked like price inflation was really more intensive care. Even so, the WCIRB found that from 2020 through 2025 the cost increase was still driven mostly by price, which rose 14 percent, compared with an 8 percent rise in utilization, for a 24 percent increase in cost per claim.

The second half of the report uses the new measure to identify what is driving the trend. Southern California has consistently shown the highest physician services utilization, and by 2025 it stood 23 percent above its 2014 level, though all regions have grown faster since 2019. Cumulative trauma (CT) claims are another factor. Non-CT claims generally use more physician services during the first 12 months, but utilization tied to CT claims has grown faster since 2022, largely because CT claims make up a growing share of the claim mix. CT claims also show heavier use of certain treatments, including nerve-damage diagnostics, psychotherapy and carpal tunnel neuroplasty. The WCIRB examined the rise of CT claims in more depth in its June 2026 report, Emerging Patterns of Cumulative Trauma Claims.

By type of service, evaluation and management (E&M) visits and physical medicine did most of the work. E&M, the largest component at roughly 35 percent of utilization, jumped sharply in 2021, which the report associates with Medicare’s higher RVUs for common office-visit codes and coding rule changes allowing visit complexity to be set by medical decision-making or total clinician time. Since 2021, low-complexity office visits have declined, while high-complexity visits in 2025 ran 35 percent above their 2021 level. Physical medicine grew from 22 percent of utilization in 2014 to 26 percent, and its utilization in 2025 was 26 percent above the 2014 level. The report credits much of that to a shift toward higher-intensity services such as neuromuscular reeducation and therapeutic activities, while lower-intensity therapeutic exercise and manual therapy declined modestly.

Surgery moved the other way and was the main offset. Its share of utilization dropped from 14 percent in 2014 to 8 percent in 2025. Nervous system surgical utilization fell 50 percent and musculoskeletal surgery 35 percent over the study period, although arthroplasty has recently climbed back above its 2014 level.

Separately, utilization of services not subject to the fee schedule ran 30 percent above its 2021 level in 2024, driven largely by the unlisted physical medicine code 97799, before moderating in 2025.

The WCIRB notes that the analysis reflects insured employers only, excludes COVID-19 claims, and uses data evaluated as of June 7, 2026, so figures may change as the data mature. Some procedures lack RVUs and are measured by service counts, and because RVUs are updated yearly, changes in Medicare valuations can register as changes in measured utilization.

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Sheriff’s Chiefs Lack Authority to Settle Deputies’ Discipline Appeals

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Three Los Angeles County deputy sheriffs — David Jouzi, Benjamin Alvarado, and Dellanira Aragon — were discharged for alleged misconduct and appealed their terminations to the Los Angeles County Civil Service Commission. In 2019, while those appeals were still pending, each deputy signed a settlement agreement with a Sheriff’s Department chief that purported to reduce the discipline and reinstate the deputy to employment. The deputies alleged the settlements were reached under a provision of the Department’s Manual of Policy and Procedures (section 3-04/020.80), after consultation with a constitutional policing adviser and with the Undersheriff’s approval.

The County refused to honor the agreements. According to the opinion, Alvarado and Aragon were told shortly afterward that County Counsel, the Director of Personnel, or the Board of Supervisors had vetoed the deals, and it was undisputed that the Board never approved them. The deputies, joined by the Association for Los Angeles Deputy Sheriffs (ALADS), sued the County for a writ of mandate, breach of contract, promissory estoppel, and declaratory relief.

This was the case’s second trip to the Court of Appeal. In the earlier round, Association for Los Angeles Deputy Sheriffs v. County of Los Angeles (2023) 94 Cal.App.5th 764 (ALADS I), the court held that the County Charter does not give County Counsel exclusive authority to settle Civil Service Commission appeals, but it also found the deputies had not yet shown the chiefs were authorized to settle. It reversed and sent the case back so the plaintiffs could amend to identify a legal basis for that authority.

On remand, the Los Angeles County Superior Court (No. 19STCP05186) sustained the County’s demurrer to the fourth amended petition without leave to amend. The trial court found the plaintiffs still had not shown that the chiefs acted under authority delegated by the Board of Supervisors or conferred by law, as Government Code section 23005 requires for anyone binding a county. A dismissal order was served in July 2025, a judgment followed on August 11, 2025, and the plaintiffs filed a notice of appeal on October 2, 2025.

In the published case of Association for Los Angeles Deputy Sheriffs et al. v. Superior Court of Los Angeles County (County of Los Angeles et al., Real Parties in Interest), No. B350110 (October 2026), the Second District Court of Appeal, Division One, treated the deputies’ appeal as a petition for writ of mandate and denied the petition, leaving in place the trial court’s ruling that the department-level settlements do not bind the County.

The procedural posture is unusual. Because the notice of appeal was filed more than 60 days after the dismissal order was served, the appeal was arguably untimely. The court nonetheless exercised its discretion to treat it as a writ petition, reasoning that the demurrer ruling had called for a proposed judgment and the later-entered judgment suggested the dismissal order may not have been intended as final, which could have misled the plaintiffs about the deadline.

The central question was whether Sheriff’s Department chiefs had authority to bind the County to settlements of pending Civil Service Commission appeals. Under Government Code section 23005, a county may act only through its board of supervisors or through agents acting under the board’s authority or authority conferred by law. The court rejected each of the plaintiffs’ four theories of authority.

First, the court refused to imply settlement authority from the Sheriff’s power to appoint, suspend, and discharge deputies. Letting department personnel unilaterally rescind discipline mid-appeal would be, in the court’s words, inconsistent with “the purpose and structure of the county’s civil service system,” which divides authority among the appointing power, the Director of Personnel, and the Commission to promote competence and guard against favoritism. Such settlements could also commit the County to pay money, including back pay, sidestepping the Board’s control over County finances. The court pointed to the fact that even County Counsel cannot settle a matter for more than $20,000 without Board approval, and declined to infer that the Board meant to give department personnel broader power. The court noted that department personnel still have options: they can bring new facts to the Commission or recommend a settlement to the Board.

Second, the plaintiffs did not show that the Department Manual provision was a valid delegation from the Board or a “law” conferring authority, and the County Code provision they cited did not delegate settlement power to department representatives.

Third, the court rejected the argument that the Department’s alleged past practice of settling Commission appeals could not be abandoned without bargaining under the Meyers-Milias-Brown Act (Gov. Code, § 3500 et seq.). Relying on Claremont Police Officers Assn. v. City of Claremont (2006) 39 Cal.4th 623 and Riverside Sheriff’s Assn. v. County of Riverside (2003) 106 Cal.App.4th 1285, the court found the plaintiffs had not analyzed whether ending the practice had a significant and adverse effect on working conditions, as the meet-and-confer framework requires.

Fourth, the court held that an earlier unpublished decision involving ALADS and former Sheriff Baca did not collaterally estop the County. That case concerned a different settlement, addressing administrative investigations of deputy-involved shootings, and never decided whether chiefs may settle Commission appeals.

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2027 Employer Health Insurance Premiums to Increase 8.2%

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Health insurers are earning sharply more in 2026 than they did a year ago, and employer health premiums are still rising faster than wages, according to company financial filings, state insurance regulators, and two benchmark employer surveys. But the numbers also show that much of the profit rebound is a recovery from an unusually poor 2025.

The KFF 2026 Employer Health Benefits Survey, released October 22 and based on interviews with 1,937 public and private employers, found that average annual premiums for employer-sponsored family coverage reached $28,303, up 5% from 2025. According to KFF’s news release, workers’ average contribution toward family coverage rose faster, by 9%, to $7,471. Average single coverage rose 5% to $9,804.

Next year looks steeper. In its September 2 release, Marsh (formerly Mercer) projected, based on responses from more than 1,800 employers, that total health benefit cost per employee will rise 8.2% on average in 2027 even after planned cost-cutting changes. That would be the largest increase since 2003. Other consultants’ projections are in the same range: Aon has projected about 9.5%, and the Business Group on Health has projected a median 9.2% before employer plan changes, according to news coverage of those reports. The sponsored piece’s description of an 8% to 10% increase and the biggest jump in over two decades is consistent with these figures.

UnitedHealth Group’s third-quarter 2026 earnings release, filed with the Securities and Exchange Commission on October 13, reported net earnings of $4.11 billion, up from $2.35 billion in the same quarter of 2025. That is an increase of about 75%. Earnings from operations rose to $6.6 billion from $4.3 billion, while revenue was essentially flat at $112.7 billion. UnitedHealth’s net margin was 3.6%.

The comparison quarter was weak. UnitedHealth’s third-quarter 2025 profit of about $2.3 billion was down from $6.1 billion a year earlier, as Becker’s Payer Issues reported at the time. That means this year’s third-quarter profit, though sharply higher, remains below its 2024 level. Similarly, the company’s full-year 2025 results show net earnings of roughly $12.1 billion, as the sponsored piece states. That was a decline from $14.4 billion in 2024, which the piece does not mention, and it came with a 2.7% net margin and a $2.8 billion one-time charge.

The rebound is not unique to UnitedHealth. The National Association of Insurance Commissioners’ 2026 mid-year health industry report, which aggregates statutory filings from health insurers, found industry net income rose 127.6% to about $27.7 billion in the first half of 2026. The industry’s profit margin rose from 1.8% to 4.1%. The company’s SEC filing confirms that people served through Medicare Advantage and related programs fell by 935,000 since the end of 2025. The company had forecast this contraction and said it would focus on margins over enrollment.

What is driving the profit gains? UnitedHealth’s own release credits a lower medical care ratio, which fell to 88.4% from 89.9%, along with pricing discipline, benefit design changes, and lower operating costs. In other words, the company says it improved results partly by charging more relative to costs and by changing what its plans cover. The employer surveys, however, point to broader cost drivers. Marsh, for example, attributed about one percentage point of its 2027 projection to growing use of GLP-1 weight-loss drugs, and news coverage of the survey also cited provider consolidation and costly new therapies.

Independent researchers have raised a related, narrower concern: that vertical integration can make insurer profitability harder to see. A Brookings Institution analysis found that about 63% of Optum Health’s 2025 revenue of $100.5 billion was paid by related UnitedHealth entities. The analysis noted that some observers see such arrangements as improving care coordination, while others say they create opportunities to shift profits out of the regulated insurance business. A separate study in Health Affairs, as reported by Healthcare Dive, found UnitedHealthcare paid Optum-affiliated providers 17% more than other providers. UnitedHealth has disputed that study and said it pays Optum in line with the market.

For employers, the takeaway is that the cost pressures are real and well documented, and 2027 renewals are likely to be the most expensive in two decades.

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340B Contract Pharmacy Drug Discount Controversy Intensifies

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The 340B program, created under 42 U.S.C. § 256b, requires drug manufacturers to sell outpatient drugs at steep discounts to safety-net hospitals and clinics. Those providers can then bill insurers at full price and keep the difference. In 2010, the Health Resources and Services Administration (HRSA) began allowing covered entities to contract with an unlimited number of outside pharmacies to dispense 340B drugs, and those arrangements have multiplied since.

A University of Pennsylvania study finding that 340B contract pharmacies spread mainly into wealthier, whiter neighborhoods remains one of the most contested pieces of evidence in the fight over the federal drug discount program. The fight has sharpened in 2026 with a federal appeals court split over state contract pharmacy laws, a new Medicare payment proposal and a new Department of Health and Human Services analysis of the program’s incentives. The study, a research letter titled Assessment of US Pharmacies Contracted With Health Care Institutions Under the 340B Drug Pricing Program by Neighborhood Socioeconomic Characteristics, was published June 17, 2022, in JAMA Health Forum, an open-access journal in the JAMA Network.

The Penn researchers used HRSA’s 340B database, Census data and the national provider registry to track 91,740 pharmacies from 2006 through 2019. They found that participation was nearly flat before the 2010 policy change and then surged, so that by 2019, 29.9 percent of all U.S. pharmacies held a 340B contract. Retail pharmacies made up 92 percent of them. The finding that drew the most attention compared how 340B and non-340B retail pharmacies changed between 2011 and 2019. Relative to other pharmacies, the share of 340B contract pharmacies fell 7.0 percent in neighborhoods with a median family income below $45,000 and rose 3.6 percent in neighborhoods at or above $80,000. It also fell in predominantly Black and Hispanic neighborhoods and in the most socially deprived areas, while the change in rural neighborhoods was not meaningful. Meanwhile, retail pharmacies overall grew slightly in disadvantaged areas, which the authors said showed the pattern was specific to 340B contracting.

The authors concluded that the growth was concentrated in affluent, predominantly white neighborhoods. In a Penn Leonard Davis Institute summary, they wrote that discounted drugs “appear to go more and more to pharmacies in wealthier communities” and that large retail chains have benefited. They acknowledged one key limitation: they could not see whether 340B discounts actually reached low-income patients. A patient who lives in a poor neighborhood can still fill a prescription at a pharmacy in a wealthier one.

Hospitals objected immediately. Speaking to 340B Report, American Hospital Association general counsel Melinda Hatton said the study “suffers from many flaws that seriously undermine its reliability.” She called its demographic conclusions misleading because the study did not account for differences among communities, particularly rural areas that may have fewer minority residents. The AHA also pointed out that one author had received pharmaceutical industry grants for other research. The study’s disclosures list industry grants and fees received by Doshi and Li, all reported as unrelated to this work, and the study itself was funded by Penn and federal research grants. Covered entities and their advocates generally argue that contract pharmacy savings fund care for vulnerable patients wherever the pharmacy is located.

Later research has added to the picture. A 2023 study in the American Journal of Managed Care, Income Differences Between Locations of 340B Entities and Contract Pharmacies, looked at 2019 contracts and found that the median household income where a contract pharmacy was located averaged about 35 percent higher than where its covered entity was located. That was true for both hospitals and federal grantee clinics. Its authors acknowledged the study was funded by Gilead Sciences. A 2022 county-level study by Nikpay and colleagues found a split: pharmacies contracting with hospitals tended to be in lower-poverty areas, while those contracting with safety-net clinics were more often in areas with higher uninsured rates.

The data still matter because contract pharmacies are now at the center of the 340B dispute. An October 8, 2026 brief from HHS’s Office of the Assistant Secretary for Planning and Evaluation, Mission vs. Margin: Misaligned Incentives in the 340B Drug Pricing Program, reports that contract pharmacies grew from about 1,300 in 2010 to more than 31,000 by mid-2026. It also reports that five companies, Cigna, CVS Health, UnitedHealth Group, Walgreens and Walmart, account for 77 percent of them. The ASPE brief does not cite the Penn study. It argues more broadly that the program’s financial incentives have drifted from its safety-net mission, and hospital groups dispute that view.

Courts are divided over whether states may force manufacturers to honor 340B pricing at contract pharmacies. On March 31, 2026, a Fourth Circuit panel in PhRMA v. McCuskey upheld a preliminary injunction against West Virginia’s contract pharmacy law, finding it likely preempted by federal law. The Fifth and Eighth Circuits had upheld similar laws in Louisiana and Arkansas. The AHA has urged the full Fourth Circuit to rehear the case, warning that the ruling could jeopardize hospitals that serve low-income patients. The ASPE brief also notes that the Centers for Medicare & Medicaid Services proposed in July 2026 to cut Medicare payment for 340B-acquired drugs, and that HRSA announced a revised 340B rebate pilot on August 3, 2026, after a court paused the original version.

For employers and health plans, the stakes go beyond geography. Under 340B, plans typically pay full price for drugs that covered entities buy at a discount, and the ASPE brief cites an estimate that self-insured employers may face a $5.2 billion cost increase from lost manufacturer rebates. Whether contract pharmacy revenue is reaching the patients the program was designed to help is the question the Penn study raised but could not answer, and it remains unresolved.

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