Hotchkiss Insurance · Employee Benefits Intelligence
The Benefits Brief
For CFOs and HR leaders who don't have time for filler. A monthly read on the regulatory shifts, market moves, and money on the table.
Inside This Issue · The CFO Defense Package
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Benefits Just Became Your Second-Largest Line Item. Here's How to Defend It.
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Your Gag Clause Attestation Is Due December 31. Most Sponsors Are About to Sign One They Can't Defend.
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ACA Affordability Just Broke 10%. Your October Contribution Decision Just Got Harder.
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Following Up · What changed since August
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On My Radar · Three stories worth tracking
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The Benefits Brief · September 2026Story 01 · Cost Defense
Story 01 · The 2027 Budget Defense
Benefits Just Became Your Second-Largest Line Item. Here's How to Defend It.
Mercer's final 2025 survey is in: $18,500 per employee, 6.7% increase, the highest in 15 years. Boards are noticing. The question isn't "why is it high" — it's "what are we doing that peers aren't?" Three defensible answers separate above-average performers from below.
Per Employee Cost
$18.5K
Average total health benefit cost per employee in 2026 (Mercer, 2,010 employers surveyed)
2026 Increase
+6.7%
Highest annual increase since 2010 — and the fourth consecutive year above 6%
Making Changes
59%
of employers making cost-management plan changes in 2026 — up from 44% in 2024
Here's the math that changes the conversation. At $18,500 per employee, a 250-person self-funded employer is spending $4.6 million a year on health benefits — before pharmacy, stop-loss premiums, or administrative fees. Compound growth at 6.7% means that number becomes $6.4M by 2030 with no plan design changes. Benefits is now the second-largest operating expense after payroll for most mid-market employers. That's the shift boards are noticing. And the September question every CFO is being asked is the same: what are we doing about it that others aren't?
The Frame That Wins the Board Conversation
The wrong answer is "health costs are up everywhere — we're doing what we can." That's a defense of the market, not your management of it. The right answer names three specific structural decisions you've made or are making, with the dollar impact and the timeline. Above-average performers can name their three. Below-average performers give the market answer. The gap between the two isn't strategy sophistication. It's whether the conversations have happened yet.
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Five months of coverage in this brief now synthesize into one CFO answer. These are the three levers separating above-average and below-average cost performers in 2026 — and the ones your board will want to hear you name. None of them require asking employees to give something up. All three protect the plan by fixing structural inefficiency, not shifting cost.
01
Site-of-care redirect on infused drugs.
The same infused cancer drug costs an average of 86% more at a hospital outpatient department than at a physician office (EBRI). Some specific drugs run 128% or 428% higher. Cancer is now the #1 employer cost driver, and early-onset cancer means it's hitting working-age employees — on your plan, not Medicare's. The defense: pull infused drug spend split by site-of-care, then route through physician offices, ambulatory infusion centers, or home infusion where clinically appropriate. Documented savings: 25–30% per episode. Covered in our July issue.
02
PBM contract audit for §406 exposure.
The Stern v. JPMorgan ruling (March 2026) confirmed that PBM prohibited-transaction claims survive dismissal where fiduciary-breach claims don't. The plaintiffs' bar has a working template. Every self-funded plan should have on file: (1) a review of PBM compensation structure, (2) documentation that a party-in-interest analysis was performed, (3) benchmark data showing PBM terms are reasonable. The audit itself protects the plan — even if you find nothing wrong. Not having documentation is the exposure. Covered in our May and June issues.
03
Structural risk decision: captive vs. open-market.
2027 stop-loss renewals are landing at 30% baseline, 50% at the outlier. Carrier loss ratios hit 8-year highs in 2024. The captive question stopped being about lower premium and became about ending the volatility. For employers on their fourth consecutive year of double-digit increases, the trade looks different. Captive underwriting windows close well before January 1 renewals. The September question isn't "should we go captive" — it's "is the option still open?" Covered in our June and August issues.
The pattern across all three: the defense is structural, not incremental. Cost-shifting to employees works once, at renewal, and creates HR problems the following quarter. Structural changes to plan design, PBM contracting, and risk vehicle work every year without asking employees for anything. That is the answer boards want to hear.
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The Benefits Brief · September 2026Story 02 · Compliance
Story 02 · Gag Clause Attestation
Your Gag Clause Attestation Is Due December 31. Most Sponsors Can't Defend Theirs.
The Gag Clause Prohibition Compliance Attestation (GCPCA) is required annually of every group health plan. Most sponsors treat it as a checkbox. It's a sworn attestation, filed with three federal agencies, that your plan contracts are free of prohibited language. Most sponsors are attesting without ever reading the underlying contracts.
Filing Deadline
Dec 31
Annual attestation due to DOL, HHS, and Treasury by December 31, 2026 for all group health plans
Plan Coverage
All
Fully-insured and self-funded ERISA, non-federal government, and church plans — no size threshold
TPAs Exiting
2026
Some TPAs announced they will no longer file on behalf of plan sponsors after this year
The CAA gag clause prohibition bars plan contracts from restricting access to provider-specific cost and quality data. Most sponsors sign the attestation based on TPA assurance and never audit the underlying language. What changed in 2026: some TPAs, including MedCost, have announced they will no longer file on behalf of plan sponsors. Filing directly means the sponsor's signature is on the attestation. If the underlying contracts contain gag language, the attestation is false.
Why This Is Adjacent to the PBM Litigation Arc
The prohibited transaction theory in Stern v. JPMorgan and the gag clause attestation share a structural DNA: both hinge on whether the plan sponsor actually knows what's in the contracts they've signed. A false attestation is affirmative evidence in a fiduciary-breach claim. The attestation you sign in December becomes the deposition exhibit in 2028.
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The "hidden gag" is the real problem. Most primary TPA and carrier contracts have been cleaned up. But downstream agreements — between your TPA and a network, between your PBM and its rebate aggregator, between any vendor and a subcontractor — are where restrictive language now lives. The plan sponsor's attestation covers those too. If your TPA can't produce clean confirmation across the entire downstream chain, your attestation is being signed on faith.
Do Now
Send one written request to your TPA, PBM, and any subcontracted network manager: "Confirm in writing that no agreement in the downstream chain restricts the plan's ability to access cost, quality, or de-identified claims data as prohibited under CAA §201." If any response comes back qualified or vague, that's the audit finding — before you sign.
Ask This
Of your TPA specifically: "Will you file the 2026 GCPCA on our behalf, and if so, what is your indemnification if the underlying contracts contain gag language?" If they will not indemnify, you are bearing the risk regardless of who clicks submit. That changes the calculation of who does the filing.
Document
Whatever you attest, minute the fiduciary review that supports it. The attestation is a single form. The defense is the file behind it — the contract review, the written vendor confirmations, and the committee minutes recording the process. Missing that file is the same gap as missing minutes on PBM oversight.
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The Benefits Brief · September 2026Story 03 · ACA Math
Story 03 · 2027 Employee Contribution Math
ACA Affordability Just Broke 10%. Your October Math Just Got Harder.
IRS Revenue Procedure 2026-26 set the 2027 ACA affordability percentage at 10.22% — the highest since the ACA was enacted. For calendar-year plans, employee contribution rates lock in during October. The math you use this month decides your 2027 pay-or-play exposure.
2027 Threshold
10.22%
Highest ACA employer affordability percentage since the law's inception; up from 9.96% in 2026
4980H(a) Penalty
$3.3K
Approximate 2027 per-full-time-employee penalty for ALEs failing to offer coverage (indexed)
Subsidy Loss Impact
1M+
Marketplace enrollees who left in 2026 after ACA enhanced subsidy expiration (see May issue)
The 10.22% number sounds like a technical adjustment. It isn't. Employers can now charge employees a higher share of premium and still meet the affordability safe harbor — but that collides with a workforce whose marketplace fallback disappeared when enhanced ACA subsidies expired in January 2026. If you raise contributions to the 10.22% limit, you capture savings and you also capture participation.
The October Decision Most CFOs Are Under-Modeling
Higher affordability threshold + subsidy cliff = participation surge you may not have priced. Workers who would have marketplace-shopped at 9.96% will accept your plan at 10.22%. More lives, more claims. Model participation change alongside contribution change.
Do Now
Model 2027 contributions at three scenarios: (1) current ratio flat, (2) at the 10.22% safe harbor, (3) split by income tier. Ask your analyst: "What percentage of our workforce sits within one contribution tier of the affordability threshold?"
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The Benefits Brief · September 2026Following Up
Following Up
What changed since August.
Three open loops from last issue. One is progressing quietly. One is quieter than expected. One took a small but consequential turn.
Progressing
August, Story 01
DOL cybersecurity enforcement is quietly ramping.
Post-January 2026 enforcement-priority declaration, EBSA investigators are including cybersecurity documentation requests in routine health plan audits — not as standalone actions yet, but as part of broader fiduciary reviews. The audit posture is testing whether committees have documented their vendor cybersecurity evaluations. If you sent the DOL 12-question checklist to your TPA as recommended last month, the responses are your file. If you did not, that's the September task that still matters.
OBBBA dependent savings accounts saw limited follow-on adoption.
Vanguard's August announcement of $1,500 per employee has not yet triggered the wave of Fortune 500 follow-on commitments some expected. Treasury guidance (REG-101355-26) remains in comment period. Most mid-market employers are appropriately parked in "evaluating, not committing" mode. The recommendation from August stands: draft your one-page internal position now, even if the position is "not yet." The board question is still coming. Adoption pressure will build if two or three peers in your industry announce before Q1.
2027 stop-loss carriers are tightening laser policies.
Early September renewal quotes are showing carriers pushing lasers more aggressively than last cycle — including on claimants who would not have been lasered in 2025. The pattern: carriers are absorbing more base-rate volatility by transferring individual-claimant risk back to the plan sponsor via lasers. If your renewal quote comes back with a lower-than-feared base rate but new lasers attached, that's the same pricing dressed differently. Ask for the no-new-laser number in writing, even if you don't take it. Knowing the gap changes the negotiation.
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The Benefits Brief · September 2026On My Radar
On My Radar
Three stories worth tracking before they become your problem.
Not yet ready for full coverage. Each one will shape someone's 2027 renewal — and the employers who see them coming get the cheaper outcome.
01
DOL Electronic Disclosure
Proposed safe harbor for digital ERISA notices. Comments due September 21.
The July 22 proposed rule would let health plans use a notice-and-access model — posting required documents online with electronic notification — as a safe harbor for ERISA disclosure. The current 2002 rule was written before smartphones. The proposal is narrow (health plans only, not stand-alone dental or life), but the operational lift savings are real. Comments close September 21. If your benefits administration platform can support notice-and-access, this rule matters. Watch for the final version in Q1 2027.
02
New Jersey Leave
NJFLA amendments expanded coverage effective July 17.
New Jersey Family Leave Act amendments broadened definitions of "family member" and modified employer size thresholds. For multistate employers with New Jersey employees, existing leave administration workflows may not capture the new coverage triggers. The compliance risk is quiet: private right of action for aggrieved employees. Confirm with your leave administration vendor that policies have been updated for the July effective date — in writing.
03
Flowers v. Caremark
Eighth Circuit affirmed ERISA preemption of state PBM law.
In August, the Eighth Circuit affirmed dismissal of a participant class action against Caremark, holding ERISA preempts Arkansas's pharmacy network adequacy requirements. The ruling narrows the state-law path to challenging PBM practices in ERISA-covered plans. It does not affect the federal §406 theory that survived in Stern v. JPMorgan — that path stays open.
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Get In Touch
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No sales pitch. No pressure. Just an honest conversation about where your benefits strategy stands — and where it could go.
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