Elevance Health Sued For Disability Discrimination Under Section 1557

Elevance Health, Inc., f/k/a Anthem, Inc., was sued last week in federal court in Maine for excluding coverage of weight loss drugs like Ozempic, Wegovy, and Zepbound to treat obesity. Holland v. Elevance Health, Inc., No. 24-cv-00332 (D. Me. Sept. 20, 2024). The putative class action brought by a public school district employee enrolled in an Anthem-insured health plan alleges the coverage exclusion for prescription medications when used to treat obesity but not when they are sought to treat other health conditions discriminates on the basis of disability in violation of section 1557 of the Affordable Care Act (ACA), 42 U.S.C. § 18116.

According to the complaint, the named plaintiff and other similarly situated enrollees, all diagnosed by their treating physicians with obesity and prescribed medically necessary prescription drugs to treat their obesity, are "qualified individuals with disabilities" under First Circuit precedent. The plaintiff asserts that "Anthem discriminates on the basis of disability against enrollees with obesity by designing and administering an exclusion of all coverage for medically necessary prescription medications to treat their diagnosed condition of obesity." The plaintiff contends that Anthem excludes all coverage of prescription medication for the treatment of obesity, even though it covers similar prescriptions for other medical conditions, such as diabetes. 

Although the alleged exclusion is written to cover prescription medications related to "weight loss," the plaintiff asserts the exclusion is a "proxy for discrimination against enrollees diagnosed with obesity" and facially discriminates against a protected group. Alternatively, the complaint alleges the exclusion is unlawful based on its disparate impact on and denial of meaningful access to treatment for enrollees with the disability of obesity.

The complaint recounts medical and public health sources that have recognized obesity as a physiological disease and its negative impact on health and the ability to engage in major life activities. It also contains averments related to what it describes as historic disability-based exclusions in health coverage. The proposed class is defined to include all individuals who have been, are, or will be enrolled in "an Anthem-administered or Anthem-insured health plan that excludes all coverage for prescription medications to treat obesity," who have been or will be diagnosed with obesity, and who have required or will require prescription drug treatment for their obesity.

Thermo Fisher Beats 401(k) Plan Forfeiture Claims but Victory May Be Short-lived

On September 19, 2024, the U.S. District Court for the Southern District of California granted a motion to dismiss an amended complaint filed against Thermo Fisher Scientific, Inc., and its 401(k) plan committee alleging ERISA fiduciary breach, anti-inurement, prohibited transaction, and failure to monitor violations arising from the plan fiduciaries' use of forfeitures. Dimou v. Thermo Fisher Scientific, Inc., No. 23-cv1732 (S.D. Cal. Sept. 19, 2024). The plaintiff in the case, which was originally brought as a class action, brought her claims under ERISA §§ 502(a)(2) and (3), seeking plan-wide, not individual, relief.

The court first addressed the issue of standing and found that the plaintiff had met her burden. The defendants argued that the plaintiff did not have a redressable injury because she disclaimed any right to individual relief in her complaint and asserted her claims were brought in a representative capacity seeking plan-wide relief only. The court, relying on Massachusetts Mut. Life Ins. Co. v. Russell, 473 U.S. 134 (1985) and LaRue v. DeWolff, Boberg & Associates, Inc., 552 U.S. 248, 256 (2008), found the plaintiff's claims seeking to "'make whole' the plan assets and for other equitable relief" were sufficient to support constitutional standing.

On the merits, the court first addressed the defendant's argument that the company's decision to use forfeitures to offset its discretionary employer contributions was a funding decision undertaken in its settlor, not fiduciary, capacity. Citing to the recently decided case Hutchins v. HP, Inc., No. 23-cv-05875 (N.D. Cal. June 17, 2024), the court disagreed, concluding, like the HP, Inc. court, that although the decision to include a plan term setting forth permissible uses for forfeitures is a settlor function, implementing that decision is a fiduciary function. 

However, the court stated that the fiduciary duty provisions of ERISA do not create an unqualified duty to pay administrative expenses, especially when the plan document does not create an entitlement to such benefits. And it found, like the HP, Inc. court, that while Treasury regulations that have historically allowed the use of forfeitures to reduce employer contributions do not foreclose the plaintiff's ERISA claims, they are "relevant authorities in evaluating the plausibility of the plaintiff's claims." In light of these "regulations and settled rules regarding the use of forfeitures in defined contribution plans" the court held that the plaintiff's allegations were too broad to be plausible and dismissed the complaint, but it granted the plaintiff leave to amend her pleadings to allege more particularized facts.

On the anti-inurement claim, the court also embraced the reasoning in HP, Inc. to hold that the plaintiff failed to state a viable claim, because nowhere in the complaint are there allegations that plan assets were removed "for the benefit of anyone other than plan participants." Likewise, the court concluded that reallocating forfeitures in the plan to provide pension benefits to other employees through use as matching contributions is not a prohibited transaction. Because the plaintiff did not allege a viable breach of fiduciary duty claim, the court dismissed the failure to monitor claim as well.

This decision adds to the split among district courts on several key issues appearing in the new wave of forfeiture lawsuits. Because the court granted the plaintiff leave to amend her allegations, we expect to see further analysis from this court in the future on the pleading standards and substantive legal issues raised.

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