Blue Cross Dodges ERISA Lawsuit Over Alleged ‘Hidden’Fees

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By Carmen Castro-Pagan

Oct. 31 — Blue Cross Blue Shield of Michigan dodged a proposed class action accusing it of breaching its ERISA fiduciary duties as a third-party administrator by charging health-care plans “hidden” fees ( Cox v. Blue Cross Blue Shield of Mich. , 2016 BL 360306, E.D. Mich., No. 2:14-cv-13556, 10/28/16 ).

Judge Mark A. Goldsmith Oct. 28 dismissed the class’s fourth amended complaint, holding that the plan beneficiaries lacked standing to pursue their claims for restitution and injunctive relief under the Employee Retirement Income Security Act. The beneficiaries failed to allege that they suffered any particularized and concrete injury as a result of Blue Cross’ alleged charging of hidden fees, Goldsmith said. They also failed to allege any likelihood of repeated injury or future harm, a prerequisite for the injunctive relief they sought, the judge said.

Despite the ruling in Blue Cross’ favor, the administrator must still defend similar allegations raised in other cases. About 229 lawsuits have been filed in the U.S. District Court for the Eastern District of Michigan by plans and plan sponsors against Blue Cross over its alleged scheme to charge ERISA plans hidden fees, according to court documents.

‘Hidden’ Fees Scheme

In their lawsuit, the two beneficiaries, who were seeking class treatment for “hundred of thousands, if not millions,” of individuals, claimed that Blue Cross engaged in self-dealing and breached its fiduciary duties by illegally paying itself additional administrative fees. They also alleged that Blue Cross failed to disclose the misappropriated funds to its principals in violation of federal law.

The beneficiaries’ allegations that they suffered “concrete injuries” when Blue Cross withheld hidden fees from their medical plans were conclusory allegations insufficient to support that they suffered an injury in fact, the court said. There were no allegations that the amount of the beneficiaries’ contributions to their plans were affected in any way by the hidden fees, that they themselves paid the fees to Blue Cross, that they were denied or received fewer benefits because of the fees or that the plans passed on to them any increase in the fees, the court said.

It was the beneficiaries’ plans that suffered concrete and particularized injuries when they paid Blue Cross the hidden fees, the court said.

Although the lawsuit was dismissed, the court pointed out that the plans involved weren’t without recourse, mentioning that other self-funded plans were currently represented in pending litigation over similar allegations against Blue Cross.

Mantese Honigman P.C. and John J. Conway III represented the beneficiaries. Dickinson Wright PLLC, Sidley Austin LLP, RDO Benefits Counsel PLLC and Michelle R. Heikka represented Blue Cross.

To contact the reporter on this story: Carmen Castro-Pagan in Washington at

To contact the editor responsible for this story: Jo-el J. Meyer at

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

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