When Advance Benefits Management Systems (ABMS) ceased operations in Georgia in April 2019, it left its clients with the bill for more than $7 million in unpaid health care claims. Now, the Department of Labor has filed a lawsuit against the company to recoup that $7 million, as well as other costs and fees.

South Carolina-based ABMS acted as a plan administrator for some 118 self-funded health plans. According to the lawsuit, ABMS's founder and president misappropriated both employer and employee contributions, a violation of their fiduciary duty under ERISA. In addition to diverting money for non-plan purposes, the company allegedly used funds from one employer to pay claims on behalf of another and failed to track payments among its employer clients.

"Companies and individuals that serve as fiduciaries have a steadfast duty to manage all assets in strict adherence to federal laws," Employee Benefits Security Administration Regional Director Isabel Culver said. "Deviating from those laws negatively impacts the hard-working individuals that invest their hard-earned money and trust."

In another blow to its clients, ABMS is also accused of failing to file stop-loss insurance claims and keeping records of employer payments, leading stop-loss insurers to refuse to reimburse many claims.

The case should serve as a warning to other employers in self-funded insurance arrangements to do their due diligence when selecting third-party plan administrators and to ensure that there is an accurate record of all payment and claims data.

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Defunct health plan administrator sued over $7 million in claims

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