In Peters v. Aetna Inc., (2021, CA4) 2021 WL 2546412), Peters sued on behalf of herself and other plan participants in her employer’s self-insured ERISA group health plan. She alleged that the billing practices used by the plan’s claims administrator and a subcontractor violated the plan’s terms and that these wrongful billing practices constituted a breach of fiduciary duties under the plan.
Peters alleged that the plan did not provide for the type of fee-shifting scheme used by the defendants. She asserted that the fees for services and applicable amounts covered under the plan were not included in the administrative fees outlined in the service agreement between the employer and the claims administrator.
Further, she claimed that when a health care provider treated a participant in the subcontractor’s network, the defendants bundled the charge for the service with the subcontractor’s administrative fee using a “dummy code.” These bundled amounts determined the participant’s and plan’s financial responsibilities. Peters asserted that concealing administrative fees in this manner was a breach of fiduciary duty.
The district court ruled in favor of the claims administrator and subcontractor without a trial, and Peters appealed. On appeal, the Fourth Circuit Court of Appeals disagreed with the district court’s conclusions on most of the other claims but did uphold one element of the district court’s ruling. The court found that Peters had not experienced any direct financial injury.
The Fourth Circuit determined that the claims administrator was a fiduciary because it had discretionary authority and control over plan assets. The court added that the claims administrator demonstrated this by its ability to implement the billing arrangement. However, the court held that the subcontractor was not a fiduciary because it only performed purely ministerial rather than discretionary functions.
The court based its determination on evidence that the claims administrator referred to the subcontractor as a health care provider and used codes that did not represent actual medical services. Accordingly, the court found that a reasonable factfinder could conclude that these actions violated the plan’s terms and constituted a fiduciary breach.
The court remanded the case to the district court for further proceedings, including the development of the evidence and consideration by a “reasonable factfinder.” The case makes it clear that courts have little tolerance for billing abuses by plan service providers. Therefore, employers must take special care to ensure that service provider payment arrangements and applicable service agreements adhere to the terms of the plan.
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