Michigan Court awards over $5 million in damages to employer who was the victim of fraud by its third party administrator.
A federal district court in Michigan has just ruled that the sponsor of a self-funded health insurance plan may recover over $5 million against Blue Cross/Blue Shield of Michigan for hidden fees. In Hi-Lex v. BCBSM, Judge Victoria A. Roberts held that the third party administrator violated ERISA by devising a scheme to obtain additional compensation without the sponsor of the self-funded health insurance plan knowing about it. BCBSM was found to have engaged in self-dealing, which is prohibited by ERISA. BCBSM “violated its fiduciary duty… to disclose information to the plaintiffs about its compensation …” As a result, BCBSM was ordered to repay all of these fees, over $5 million, prejudgment interest and attorney fees.
Judge Roberts also held that BCBSM acted in bad faith by issuing false reports for more than a decade. Monthly claim reports, quarterly and annual statements and Form 5500 certifications never disclosed that the 3rd party administrator was charging an additional amount. In fact, the Court held that BCBSM was misrepresenting the fees that it was charging.
If your company is the sponsor of a self-funded health insurance plan, a cafeteria 125 plan or a dental or vision plan, you should conduct an audit of the plan expenses. ERISA Section 103 (a)(3)(A) require sponsors of self-funded insurance plans to perform an audit. The attorneys at Benesch have established a relationship with a reputable auditing company. In fact, those auditors are assisting the plaintiff in the above-referenced case, as well as other cases around the country. Moreover, public companies are required to audit all of their ERISA benefit plans, which would include their self-funded health insurance plans.
We strongly suggest that you have such an audit performed to make sure that your self-funded plan has been properly charged. Such an audit may reveal that there are funds due and owing back to your self-funded health insurance plan.
For additonal imnformation, please contact Mark Waterfill at (317) 632-3232 or firstname.lastname@example.org.