The Court of Appeals for the Sixth Circuit ruled that an insurer was not acting as a fiduciary when it negotiated rates with hospitals that favored its health maintenance organization clients over its self-funded plan clients. Under Employee Retirement Income Security Act of 1974 (ERISA), a fiduciary is obligated to discharge its duties with respect to a plan solely in the interest of the participants and beneficiaries. In this case, the plaintiff claimed that the insurer's fiduciary status should have prevented it from engaging in contract negotiations that resulted in higher rates to the self-insured plan in which he participated. However, in a divided decision, the court held that although the insurer acted as a fiduciary in its capacity as a claims processing agent for the plan, the insurer was not acting as a fiduciary to the plan when it negotiated rates with hospitals. A factor that the court considered when ruling that the insurer was not acting as a fiduciary was that the insurer’s rate negotiation was generally appliacable to a broad range of health care customers and not directly associated with the benefit plan at issue. (DeLuca v. Blue Cross Blue Shield of Michigan, 6th Cir. 2010)
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Insurer not a fiduciary when negotiating rates
- Hodgson Russ LLP
- Peter K. Bradley, Anita Costello Greer, Michael J. Flanagan, Richard W. Kaiser, Arthur A. Marrapese III and Daniel R. Sharpe
- February 11 2011
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