Patients in Peril: The Hidden Risks of Employer Health 'Savings' Plans

WASHINGTON – January 07, 2026 – A growing number of employer-sponsored health plans are adopting controversial cost-cutting strategies that patient advocates say are jeopardizing the health of individuals with rare and complex diseases. These strategies, known as Alternative Funding Programs (AFPs), promise significant savings on high-cost specialty medications. However, an investigation reveals they often operate by forcing vulnerable patients to use drugs sourced from outside the United States, which are not approved by the Food and Drug Administration (FDA) and lack critical U.S. safety information.

Patient advocacy groups, led by the Rare Access Action Project (RAAP), are sounding the alarm, arguing that these programs exploit regulatory loopholes to shift costs and risks onto patients, all under the guise of fiscal responsibility.

A Shell Game of Coverage and Coercion

At the heart of the AFP model is a maneuver that critics call a dangerous shell game. These third-party vendors work with self-funded employers to reclassify specific, high-cost specialty drugs as "non-essential health benefits." This reclassification is a critical step, as it allows the health plan to sidestep consumer protections mandated by the Affordable Care Act (ACA), which designates prescription drugs as an Essential Health Benefit (EHB).

Once a drug is deemed "non-essential," the plan can legally exclude it from coverage. Employees who rely on these life-sustaining therapies are then left with a stark choice: enroll in the AFP or face 100% of the medication's staggering cost. Crucially, this out-of-pocket expense does not count toward the patient's annual deductible or out-of-pocket maximum, making the non-AFP path financially impossible for nearly everyone.

"No plan should be pressuring patients into alternative funding schemes to avoid taking responsibility for the coverage and risk they are paid to manage," said Michael Eging, Executive Director of RAAP, in a statement. This coercion effectively forces patients into a parallel system where their employer's insurance becomes meaningless for their most critical medical need.

Furthermore, these programs often steer insured patients toward manufacturer-run Patient Assistance Programs (PAPs), which are charitable funds intended for the uninsured or underinsured. Research indicates that 65% of patients in AFPs were required to apply for a PAP, with half of those applications being denied precisely because of their AFP enrollment. This practice not only delays care but also drains vital resources from the truly needy.

From Delayed Care to Dangerous Drugs

The consequences for patients are not just financial. Data reveals that individuals funneled into AFPs experience significant and dangerous disruptions to their care. The median time to receive treatment through an AFP is 32 days, four times longer than the 8 days for patients using traditional pharmacy benefits. During that wait, their health can deteriorate. One study found that patients in these programs are 9.2 times more likely to experience poor clinical outcomes, such as disease progression.

Perhaps the most alarming aspect is the sourcing of medications. When PAPs are not an option, some AFPs turn to international importation. The drugs procured from foreign countries often arrive without FDA-approved labeling, U.S. warnings, or patient educational materials. This practice was highlighted in an amicus brief filed by patient groups in the case of Gilead Sciences vs. Meritain Health, Inc., which stressed "the obvious and serious risks to patient health created by Appellants' conduct." An FDA warning letter issued to an AFP echoed this concern, concluding that the importation of such drugs "pose significant health risks to U.S. consumers."

One patient with a rare immune disorder described the constant stress of the AFP process as directly harming her health. She noted that the program only targeted employees with the most expensive medication needs, leaving her feeling singled out and vulnerable.

"When patients and their employers utilize the insurance that they pay for, they should be assured that the products they use are safe and labeled with FDA approved information," Eging stated.

The Employer's High-Stakes Gamble

For employers with self-funded health plans, the appeal of AFPs is purely economic. With specialty drugs accounting for over half of total pharmacy spending, the promise of reducing these costs by outsourcing them to a third-party vendor is compelling. The use of AFPs by employers more than doubled from 6% in 2021 to 14% in 2022, with vendors often charging a fee of 20% to 30% of the achieved "savings."

However, legal and ethical experts warn that this short-term financial gain may come with significant long-term liabilities. By engaging AFPs, employers may be exposing themselves to compliance issues under the Employee Retirement Income Security Act (ERISA) for potential fiduciary breaches or discriminatory benefit design. The IRS and the Department of Labor could impose steep penalties if a plan is found to be improperly managing its benefits.

Beyond the legal exposure, there is a human cost. Forcing employees with chronic conditions into a high-stress, lower-quality system of care can severely damage morale, trust, and employee retention. The ethical dilemma of saving money by diverting charitable funds and exposing employees to unvetted medications is a growing concern for benefits managers and corporate leaders.

A Call for Regulatory Reckoning

The rise of AFPs has exposed a critical vulnerability in the U.S. healthcare regulatory framework. Advocacy groups like RAAP are pushing for a swift response from policymakers and regulators to close the "non-EHB" loophole that enables these programs to exist. The outcome of legal challenges, such as the Gilead case, could set a powerful precedent, potentially clarifying the responsibilities of health plans and employers to provide safe, FDA-approved therapies.

As this battle unfolds in courtrooms and legislative chambers, patients with rare diseases remain caught in the crossfire. Their access to stable, safe, and effective treatment hangs in the balance, pitted against a complex system of financial incentives that prioritizes cost containment over the fundamental principle of patient safety.