The International Foundation of Employee Benefit Plans released its 2027 healthcare cost trend survey two weeks ago. Employers project a median cost increase of 10% for 2027, the second consecutive year at that level. Specialty drugs and catastrophic claims are named as primary drivers.
For Taft-Hartley fund trustees, that number doesn’t land as an abstract trend. It lands on fund assets, contribution rates, and the benefits union members earn through collective bargaining. Multiemployer funds often cover populations in the hundreds to low thousands of lives. One or two high-cost specialty claimants can shift per-member costs in ways that a large commercial employer absorbs without visible impact. The scale of the funds themselves compresses the financial stakes of specialty drug cost management in this market.
That’s the context. The governance structure is what makes the conversation different.
The Fiduciary Standard
Taft-Hartley funds are jointly governed trusts authorized under Section 302(c)(5) of the Labor Management Relations Act of 1947 and subject to ERISA fiduciary standards. Boards are composed of equal numbers of labor and management representatives. Every trustee, regardless of which side appointed them, owes the same fiduciary duty: to act solely in the interest of plan participants and their beneficiaries. Not the union. Not the contributing employers.
ERISA’s exclusive benefit rule requires trustees to act with the care and diligence of a prudent expert. It requires that plan assets be used only for the benefit of participants and to defray reasonable administrative expenses. It requires trustees to select and monitor service providers with appropriate due diligence.
This standard carries personal liability. Trustees who ignore known problems or fail to act prudently on available information face legal exposure under ERISA.
The reason this matters for the specialty drug cost conversation is straightforward: if a financial offset on high-cost drug spend exists and isn’t being pursued, the question of why belongs on the board agenda.
Where the Cost Pressure Is
The specialty drug problem for Taft-Hartley funds is well documented. Segal’s 2026 Health Plan Cost Trend Survey found that specialty drug trend is projected to be nearly a percentage point higher than the trend for all outpatient prescription drugs, already the highest category of cost increase across benefit plan types. UHC’s analysis of Taft-Hartley trends for 2026 noted directly that a small number of high-cost specialty therapies, gene therapies, biologics for autoimmune conditions, and related medications can create sudden, significant budget pressure for multiemployer funds that cover only hundreds or a few thousand lives.
The response in most funds, as documented across the Taft-Hartley benefit advisory literature, focuses on pharmacy benefit design: formulary management, biosimilar strategies, Centers of Excellence arrangements, and PBM structure. That’s the infrastructure that exists and has been built for this market.
Physician-administered specialty drugs, infused biologics, oncology agents, and other high-cost therapies given in clinical settings are billed differently. They’re medical claims, adjudicated through the TPA, governed by the TPA agreement rather than the PBM contract. Manufacturer rebate programs exist on many of these drugs. The process for pursuing them sits entirely outside the pharmacy benefit infrastructure.
IFEBP’s analysis of 1,436 multiemployer health plans using Form 5500 data found median benefit costs of $13,121 per participant per year, a figure driven in significant part by the specialty drug categories most commonly administered under the medical benefit. The dollar concentration in these categories is where the medical benefit rebate question becomes most financially relevant.
The Structural Gap
PSG’s 2026 Trends in Specialty Drug Benefits Report documented a 50-point gap between employer pharmacy benefit rebate receipt (93%) and medical benefit rebate receipt (43%). Taft-Hartley funds operate as self-funded ERISA plans. The same billing structure that creates this gap- J-code claims through the TPA separate from the PBM contract- applies here. PSG’s survey doesn’t break out Taft-Hartley funds as a separate category, but the structural mechanics are identical to any other self-funded plan.
When PSG asked employers not receiving medical benefit rebates why, 29% said the question had never been raised with their health plan or TPA. Another 29% said the health plan doesn’t receive the rebates at all. The remaining third said the health plan captures them but uses them to offset premiums.
All three of those situations represent a service provider oversight question that ERISA-governed trustees are positioned, and arguably obligated, to ask.
The Trustee Question
This isn’t an argument that trustees are failing their duty by not having a medical benefit rebate program in place. Most fund boards aren’t aware the channel exists separately from pharmacy benefit rebates, and the advisor community serving this market hasn’t made it a standard part of the cost-containment conversation. The pharmacy side gets reviewed. The medical side, in most cases, doesn’t.
What it is an argument for is that the question belongs in front of the board.
ERISA requires trustees to monitor service providers and ask whether plan assets are being managed in the interest of participants. A TPA relationship that doesn’t include a process for pursuing manufacturer rebates on medical benefit specialty drug claims is a vendor oversight question, one that fits squarely within what a prudent trustee should be reviewing.
IFEBP’s 2027 cost trend projects another year of 10% cost pressure on top of the last. The advisors, consultants, and attorneys who serve Taft-Hartley fund boards are the most direct path to putting this question in front of trustees who haven’t heard it yet.
If you advise Taft-Hartley fund boards or serve as a trustee, has the medical benefit rebate question come up in recent cost-containment reviews, or is the conversation still focused on the pharmacy side? Comment below.
Disclaimer: This newsletter references publicly available findings from the International Foundation of Employee Benefit Plans (IFEBP), Segal, PSG’s 2026 Trends in Specialty Drug Benefits Report, and publicly available federal law and DOL guidance. VativoRx is not affiliated with or endorsed by IFEBP, Segal, PSG, the National Alliance, or any advisory organization referenced. This newsletter is provided for informational and educational purposes only and does not constitute legal, regulatory, fiduciary, or financial advice. Taft-Hartley fund trustees should consult qualified ERISA counsel and benefit consultants regarding specific circumstances and fiduciary obligations.