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Employer Sues Blue Cross Blue Shield of Michigan for Alleged ERISA Violations
Wesco Inc. alleges BCBSM exploited self-funded health plans by charging fees to fix its own billing errors, in violation of federal fiduciary duties.
Wesco Inc., a Michigan-based convenience store and gas station chain, has filed a complaint in U.S. District Court for the Eastern District of Michigan against Blue Cross Blue Shield of Michigan, accusing the insurance company of engaging in a scheme to unlawfully profit from employee health care plans it administers.
Wesco Inc. et al v. Blue Cross Blue Shield of Michigan, filed on June 9, alleged that BCBSM violated the Employee Retirement Income Security Act by exploiting its fiduciary status in charging excessive, self-determined fees through a so-called “Shared Savings Program.” Wesco alleges that BCBSM enrolled self-funded plans into this program without consent and then profited by charging up to 30% fees for correcting administrative errors caused by BCBSM itself.
“Such misconduct is prohibited by ERISA, which forbids fiduciaries like BCBSM from engaging in self-dealing or placing their own interests above those of the plans and plan enrollees they serve,” the complaint states.
The case comes as plan sponsors are becoming more aware of the scope of their fiduciary duties following the passage of the Consolidated Appropriations Act of 2021. That law requires sponsors to monitor pharmacy benefit managers and the third-party administrators that manage their plans. The law also amended ERISA to mandate any group health plan service provider disclose its direct and indirect compensation to plan fiduciaries.
In one example cited in the Wesco complaint, a hospital submitted an inflated $10,000 bill, which BCBSM allowed through initial review. Upon later denying the claim, BCBSM still charged Wesco a $3,000 SSP fee for the “savings” it generated by not paying the erroneous claim.
The suit claims this arrangement incentivizes BCBSM to allow billing errors so it can later “correct” them and collect additional fees, a practice the U.S. 6th Circuit Court of Appeals recently described as “presumptively unlawful” in a separate case, Tiara Yachts Inc. v. BCBSM, according to the complaint.
Wesco is seeking restitution, disgorgement of all SSP fees paid and other legal remedies. The company also aims to represent a class comprising all self-funded plans and sponsors from which BCBSM has collected SSP fees.
The complaint states that BCBSM, despite being a nonprofit, amassed “massive excess surplus levels” and awarded multi-million-dollar compensation packages to top executives, further supporting the plaintiff’s claims of profiteering.
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