4-minute read
A second large employer and its insurer have been taken to court over alleged violations of the employer’s fiduciary duty as a health plan sponsor.
The class-action lawsuit, filed on April 2, 2024, accuses the Mayo Clinic and Medica of failing to provide a "full and fair review" of plan enrollee appeals as required by law, thus leaving the plaintiff and potentially thousands of class members facing large healthcare bills.
Earlier this year, Johnson & Johnson was sued by an employee who claimed the company's mismanagement of drug benefits led to exorbitant overpayments for generic drugs. For example, a prescription for teriflunomide, a drug used to treat multiple sclerosis, which could be purchased for as little as $28.40 without insurance, was billed at $10,239.69 to Johnson & Johnson employees.
That lawsuit, the first of its kind since the passage of the Consolidated Appropriations Act of 2021, accuses Johnson & Johnson of breaching its fiduciary duties under the Employee Retirement Income Security Act, or ERISA. It did so, the suit claimed, by failing to prudently manage its employee benefit plans, resulting in higher costs for prescription drugs, insurance premiums, and other related expenses.
Allegations of Deceptive Practices
The Mayo Clinic class action claims the defendants’ actions led to underpaid claims and adverse benefit determinations that were allegedly inconsistent with or unauthorized by the terms of Mayo’s own insurance plans.
As a result, the plaintiff said they and others were left with big health care bills that should have been reimbursed.
RELATED: How Health Plans Can Ensure They’re in Compliance with the CAA
The complaint claims that Medica, acting as the plan administrator, used “deceptive, misleading, arbitrary” pricing methods that allowed for inconsistent reimbursement rates in violation of the law and Medica’s fiduciary responsibility.
According to the suit, the plaintiffs did not provide accurate or complete information through an employee benefits portal, including how they calculate out-of-network reimbursement costs and deductibles.
The Mayo employee also alleges the portal did not provide accurate information about which providers were in-network, and that some providers were listed as being in-network when, in fact, they were not.
The lawsuit seeks declaratory and injunctive relief, aiming to enjoin Mayo Clinic and Medica from continuing their alleged breaches of their fiduciary duty. Additionally, the plaintiff and the proposed class are asking for a declaration that the defendants' actions violated ERISA, along with the enactment of measures to ensure compliance with ERISA's requirements for claims processing and appeals.
The case underscores the critical importance of adherence to ERISA and CAA guidelines by fiduciaries, including employers themselves.
A spokesperson for Medica told the Minnesota Reformer news outlet that the company doesn’t comment on pending litigation. A Mayo spokesperson said the organization is “committed to supporting the health and wellness of (its) employees and their families.”
Read more about employers’ new fiduciary obligations under the CAA here and the secret payments in your company’s health plan here.
The Mahoney Group, based in Mesa, Ariz., is one of the largest independent insurance and employee benefits brokerages in the U.S. For more information, visit our website or call 877-440-3304.
This article is not intended to be exhaustive, nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel or an insurance professional for appropriate advice.