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A new federal appeals court ruling could help employers that want to sue their plans' third-party administrators, or TPAs.
A three-judge panel at the 6th U.S. Circuit Court of Appeals ruled Wednesday that the activities of a plan's TPA may make it a plan fiduciary under the Employee Retirement Income Security Act.
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Once the employer, Tiara Yachts, established that the plan administrator, Blue Cross Blue Shield of Michigan, or Michigan Blue, was an ERISA fiduciary, the employer could sue the administrator over allegations that the administrator had intentionally overpaid out-of-state providers and then made money by clawing back the overpayments, according to the panel's ruling on the case, Tiara Yachts v. Blue Cross Blue Shield of Michigan.
A TPA can become an ERISA fiduciary by exercising authority or control over plan assets or by exercising discretionary authority over plan management or administration, according to an opinion written by Circuit Judge Rachel Bloomekatz.
When Tiara Yachts showed that Michigan Blue controlled the plan assets when it was overpaying the medical providers, it was showing that Michigan Blue was acting as an ERISA fiduciary, Bloomekatz wrote.
The panel reversed a district court's dismissal of the case and returned the case to that court for further proceedings.
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Representatives for Tiara Yachts and Michigan Blue were not immediately available to comment on the case.
The history: Tiara Yachts is a Michigan company that designs and makes boats. It hired Michigan Blue to run its self-insured health plan in 2006.
Tiara Yachts alleges that Michigan Blue intentionally paid out-of-state providers whatever amount the providers requested, rather than the "customary amount," so that it could benefit from a contract provision that let it keep 30% of money clawed back later through a "shared savings program.
The case: Tiara Yachts sued over allegations that Michigan Blue had breached its fiduciary duty by handling billing the wrong way and keeping some of the cash clawed back.
Michigan Blue argued that Tiara Yachts had not shown that Michigan Blue had acted as an ERISA fiduciary.
The district court agreed with Michigan Blue and dismissed Tiara Yachts' complaint.
The Tiara Yachts case is part of a wave of cases involving employers that say their health plan TPAs have been or should have been acting as fiduciaries and putting the participants' interests first.
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Allison Bell
Allison Bell, a senior reporter at ThinkAdvisor and BenefitsPRO, previously was an associate editor at National Underwriter Life & Health. She has a bachelor's degree in economics from Washington University in St. Louis and a master's degree in journalism from the Medill School of Journalism at Northwestern University. She can be reached through X at @Think_Allison.
