United States: The Potential Impact Of Insurance Carrier And TPA Legal Battles On Self-Funded Plans

The U.S. Department of Labor (DOL) recently filed suit against the Blue Cross and Blue Shield of Minnesota (BCBSM), alleging various violations of the Employee Retirement Income Security Act (ERISA). The outcome of this case is likely to be significant, as it raises issues concerning legal authority and fiduciary responsibility in the context of third-party administrators (TPAs) of self-funded employee welfare benefit plans.

DOL vs. BCBSM

In its complaint, the DOL alleges that BCBSM exceeded its scope of authority and failed to follow the required standards of conduct as TPA for self-funded employee welfare benefit plans governed by ERISA. This case concerns BCBSM's handling of MinnesotaCare Tax (MNCare Tax), Minnesota's provider tax. More specifically, BCBSM decided to compensate its in-network healthcare providers for their MNCare Tax obligations, even though those providers were responsible for payment of the tax, not BCBSM or the plans. BCBSM then billed the plans for reimbursement for the MNCare Tax payments as part of the overall claims paid by the plans, but it did not specifically identify or disclose the tax payments as part of the claims.

As a result, the DOL claims that BCBSM acted as a fiduciary of the plans by exercising discretionary authority over claims determinations and payments, a significant breach of fiduciary standards under ERISA. The DOL also alleges that BCBSM engaged in prohibited transactions under ERISA by transferring plan assets to parties in interest without proper authorization. Finally, the DOL claims that BCBSM breached its fiduciary duty to always act in the best interests of plan participants' beneficiaries, as ERISA requires. In summary, the DOL complaint accuses BCBSM of overstepping its authority as TPA to assume fiduciary responsibilities, violating those responsibilities by engaging in prohibited transactions and breaching its fiduciary duties.

Other Lawsuits Alleging ERISA Violations Against TPAs

Although this is the first such lawsuit that the DOL has filed against a TPA for overstepping the bounds of its authority in violation of ERISA, plaintiffs in other recent lawsuits have made the same allegations. These lawsuits illustrate the increasing scrutiny of self-funded employer health plans and the TPAs that administer them.

For example, in Massachusetts Laborers' Health and Welfare Benefit Fund vs. Blue Cross Blue Shield of Massachusetts, members of the self-funded health plan accused the TPA of overcharging them for healthcare and administrative services. They claimed that Blue Cross prioritized its interests over those of the plan participants and beneficiaries and concealed its actions. The trial court dismissed the complaint for failure to make a plausible claim that Blue Cross was an ERISA fiduciary, and the U.S. Court of Appeals for the First Circuit upheld the case's dismissal.

Furthermore, in Kraft Heinz vs. Aetna, the plaintiffs alleged that Aetna, acting as TPA, charged undisclosed fees and processed medical and dental insurance claims without a human review process. The judge dismissed that case and sent it to arbitration for a resolution.

Finally, in Bricklayer and Metal Worker Unions vs. Elevance Health, multiple unions accused the TPA of failing to allow self-insured plans to access their claims and charging higher rates than were negotiated with hospitals. Elevance filed a motion to dismiss, arguing that it was not an ERISA fiduciary concerning the alleged actions outlined in the complaint. The court has yet to issue a ruling in the case.

As noted above, the outcome of these cases could dramatically change the role of TPAs in self-funded plan administration and their applicable fiduciary responsibilities and duties. Millions of Americans rely on employer-sponsored health care plans, so the stakes are high regarding the plans being administered properly and fairly to all parties involved. The DOL is taking a proactive role in safeguarding the interests of plan participants and beneficiaries against a perceived lack of accountability and transparency due to the increasing presence of TPAs in the healthcare industry.

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