By Chris Deacon
BREAKING Litigation Alert: Major ERISA Win for Employers as 6th Circuit Blows the Lid Off TPA “Savings” Schemes
Tiara Yachts v. Blue Cross Blue Shield of Michigan is the employer-side ERISA decision we’ve been waiting for.
Today, the Sixth Circuit reversed the dismissal of fiduciary breach claims against BCBSM and made clear that TPAs that control plan assets and profit from their own overpayments are not just “administrators” — they’re fiduciaries.
And employers do have a shot at holding them accountable under ERISA.
What Happened?
Tiara Yachts hired BCBSM to administer its self-funded health plan.
BCBSM used a scheme called “flip logic” to intentionally overpay out-of-network claims — ignoring agreed-upon “Host Blue” pricing.
Then it launched a Shared Savings Program, where it clawed back overpayments and kept 30% of the recovery for itself.
Yes, you read that right:
“BCBSM knowingly squandered plan assets by reimbursing certain out-of-state providers at charge rather than at the Host Blues’ lower rates.” – Opinion
Then BCBSM profited from fixing its own mess — collecting fees tied directly to the inflated payments it authorized.
The Sixth Circuit dismantled BCBSM’s defenses. Here are some of the most important and interesting quotes from the opinion:
▪️ On Fiduciary Status: “To hold that an administrator like BCBSM insulates itself from ERISA liability because a contract governs its relationship… would gut ERISA’s fiduciary provisions.”
▪️ On Control of Plan Assets: “BCBSM had the authority to write checks on the Plan account and exercised control over where Plan funds were deposited and how and when they were disbursed.”
▪️ On System-Wide Overpayments: “We do not read ERISA to categorically immunize conduct that affects many plans rather than just a few.”
▪️ On Profiting from Overpayments: “The more overpayments BCBSM made on the front-end while processing claims, the more money it could receive on the back-end through the SSP.”
Employers – this is the wake up call you’ve been waiting for. This is a clear roadmap to challenge the so-called “industry standard” behavior of their TPAs.
If your TPA sets prices, pays claims, and restricts your access to the data…
If they then offer to recover savings from those same claims and pocket a fee…
And if they tell you it’s “just part of the contract”…
This decision tells you: That’s not a defense. That’s a fiduciary breach.
“Contractual duties and ERISA fiduciary status are not mutually exclusive.”
Employers, this ruling is a win, a weapon, and a WARNING SHOT.
You are on notice. If the courts are willing to entertain the notion that this TPA behavior could be a fiduciary breach, then what are the implications for you if you knowingly permit such behavior to continue when knowing it occurs?
Use this case to demand access to your data.
Audit your claims.
This case is a judicial recognition that the status quo is incompatible with fiduciary duty under ERISA.
