Plan Sponsors May Face A Perry Mason Moment?


Perry Mason Has Never Lost A Case

If an ERISA Plan Sponsor has irrefutable evidence the plan is overpaying for health care, can a plan participant sue the Plan Sponsor and it’s trustees, jointly and individually, for wantonly squandering plan assets and win?

For example, suppose a Plan Sponsor has accessed a managed care network without knowing what prices have been negotiated between the network intermediary and medical care givers and has agreed to waive or limit their claim audit rights.

The third party administrator, at the direction of the Plan Sponsor, reprices all claims benchmarked against Medicare allowable rates for comparative purposes while at the same time the PPO network reprices claims for claim processing and payment by the third party administrator.

It is determined PPO network claims, in the aggregate, are paid at 338% of Medicare. Yet, other groups in the same geographic area are paying 120% using the same medical care givers. Hospitals and doctors are accepting patients from these employers and cashing claim checks, and have been doing so for years.

Joe Sixpack, struggling to make ends meet for his family of five, gets wind of this and begins to think, “My employer is screwing up, and his screw ups are costing me and the rest of the employees an arm and a leg towards the cost of health care. My monthly contributions into plan assets could be better managed. I am going to sue while I look for another job!

Will Joe have a fighting chance in such a lawsuit? Lahle Wolfe suggests a Joe Sixpack can sue and get some protection:

“ERISA has its limitations, and it is a complicated area of law if you need to pursue a civil claim against an ERISA employer, but it still offers some protection to employees who may be wronged due to the financial mismanagement of plan fiduciaries.  For example, an employee may be able to sue the fiduciary of a plan if he/she mismanaged the plan and caused a loss to the employee(s).”

Joe has the right to sue for benefits and breaches of fiduciary duty in this instance. ERISA requires the disclosure of financial and other information concerning the plan to beneficiaries upon request. It would become quite evident in this case that the plan fiduciary/s were aware plan assets were routinely distributed to health care providers in amounts far greater than required to access care.

Attorneys are gearing up for windfall profits and welcomed publicity. It’s already started here in Texas with numerous lawsuits filed in federal court in Houston last summer. Many more are coming.

Post Script: Joe Sixpack settled out of court, retained his job, and spends his weekends with his buddies enjoying his new bass boat and cottage at Falcon Lake. His children now go to private school and his wife, for the first time, is a stay-at-home Mom.

Related post: Protection Money In Health Care