icon on Over the past few years, class action lawsuits have been emerging from groups of employees suing their employers for excessive health plan costs stemming from claims that the employer is failing to monitor costs imposed by its health plan service providers. In 2023 alone, there were over 40 excessive fee lawsuit settlements, with settlements ranging from $200,000 to $124.6 million, and those numbers are only increasing.
What are these lawsuits about?
ERISA places obligations on health plan fiduciaries (the employer, plan service providers, etc.) to act prudently and only in the best interests of plan participants. This includes paying only reasonable and necessary fees for services to the health plan. In 2020, the Consolidated Appropriations Act was enacted, and requires health plans to disclose fees and provide price transparency to plan participants. These disclosures include, among other things, how much an employer pays its health plan service providers and how much the employer pays for prescription drugs to be made available through the plan. As a result of health plan participants now having access to this pricing information, various class action lawsuits are being filed alleging that employers are breaching their fiduciary duties by not prudently monitoring costs and thus passing those unnecessary costs onto health plan participants.
How can employers avoid these lawsuits?
There are several best practices that employers can take to attempt to avoid excessive fee suits from employees. Employers should regularly monitor health plan service provider fees with regular RFPs and price negotiations, document health plan decisions in benefit committee meetings and provide fiduciary training for the HR department. It is also important for employers to regularly speak with their ERISA attorneys to stay informed on the nuances of health plan compliance. For more information, please contact Maria Topalovic.