Blue Cross Blue Shield of Michigan (BCBS) offers three forms of health coverage, a traditional open access plan, a PPO plan, and a HMO plan. Additionally, BCBS provides claims processing and other administrative services to self-funded plans. Flagstar Bank contracted with BCBS to administer its self-funded plan. DeLuca was a beneficiary in Flagstar's plan through his wife's participation as an employee of Flagstar. Prior to 2004, the rates paid by BCBS' traditional and PPO plans were lower than the rates paid by the HMO plans. In 2004, in an effort to make the HMO plans more competitive, BCBS negotiated agreements with a number of hospitals, which altered the pre-existing rate agreements for the HMO plans. However, to keep hospital rates budget-neutral, BCBS raised the rates for the traditional and PPO plans. DeLuca filed suit against BCBS for breach of fiduciary duty under ERISA.
The Sixth Circuit agreed with the district court that BCBS did not breach its fiduciary duty because it was not acting as a fiduciary when it negotiated the rates. The court found that BCBS acted in two capacities in its relationship with the Flagstar plan, as plan administrator and claims processor, where it acted as a fiduciary and as a distributor of health-care services, a part of which includes negotiating discount rates for medical services. The court held that BCBS was not acting as a fiduciary when it negotiated the rate changes because those "dealings were not directly associated with the benefits plan at issue but were generally applicable to the broad range of health-care customers." The court distinguished actions taken as administrator of the plan from a business decision which has an effect on an ERISA plan. The court determined that this case fell into the latter standard and thus, BCBS was not subject to the fiduciary concerns of ERISA.