The U.S. Court of Appeals for the First Circuit has affirmed the decision of a trial court finding that the third-party administrator (TPA) of a self-insured multiemployer health plan was not an ERISA fiduciary. The case is Mass. Laborers’ Health and Welfare Fund v. Blue Cross Blue Shield of Mass., 2023 WL 3069637 (1st Cir. 2023).
Based on its administrative activities, the plan argued that the TPA was an ERISA fiduciary. According to the plan, the TPA breached its fiduciary duties by failing to accurately reprice provider claims and recovering plan overpayments in a manner that constituted self-dealing.
The trial court and the First Circuit considered whether the TPA was a fiduciary because it exercised discretionary authority or control over plan management or the management or disposition of plan assets. The appellate court concluded that while the TPA might have committed a contractual breach, it did not engage in ERISA fiduciary actions.
For instance, the TPA had no authority to deviate from its negotiated rates when pricing claims, and the plan retained full authority to determine eligibility for benefits and adjudicate members’ claims. Moreover, pricing errors resulted from the TPA’s clerical errors and failure to follow contractual obligations, not any exercise of medical judgment. As a result, the court found that the TPA had no discretionary authority over plan management.
Likewise, the court determined that the TPA did not exercise control or management over plan assets in repricing claims. Instead, the TPA merely performed a ministerial action in paying claims. Moreover, unlike in a similar case involving plan asset misuse, the plan made no allegations that the TPA used the assets for its benefit or billed the plan for other fees. Nonetheless, the appellate court noted that its ruling was fact-specific and did not indicate that all TPAs lack fiduciary status if the plan is responsible for adjudicating claims. Therefore, self-insured plans and TPAs should use caution in formulating their administrative service arrangements.
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