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How to Prepare For Possible Health Plan Litigation


In this article, Joanne Roskey explains that plan sponsors, fiduciaries, and service providers to employee benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) should prepare now for what could be a new wave of class-action ERISA fee and expense litigation - this one crashing down on health care plans. In the last two decades, hundreds of class action lawsuits have been filed against fiduciaries of ERISA retirement plans alleging their imprudence and lack of oversight of plan finances caused their plans to pay too much for investments and plan administration. With new health plan disclosure and transparency laws in place, the groundwork is laid for a new wave of lawsuits focused on health plan expenditures and fees. Like the retirement plan cases, the anticipated health plan fee litigation will be costly to defend. Roskey suggests that as this litigation takes shape, health plan fiduciaries and service providers should carefully review what they respectively pay and charge for health plan benefits and services. Given the complexity of health care pricing and contracting, assessing the reasonableness of health plan fees and expenses is not easy. Plan fiduciaries may not have sufficient information about, or access to, claims payments and other financial data or their third party administrators' (TPA) or insurer's pricing and payment practices. Roskey suggests that fiduciaries and service providers should act now to mitigate the legal risks associated with lawsuits alleging health plans paid unreasonable and imprudent fees and expenses. She outlines a number of actions that will make plan fiduciaries, their plans and plan service providers less attractive targets for litigation or at least increase the chance of an early court ruling in their favor in cases filed against them.

This article was republished in Bloomberg.