Earlier this month, a Mayo Clinic employee filed a proposed class action against the clinic, arguing that the clinic’s employee health plan and its third-party administrator (TPA) Medica, underpaid for services performed by out-of-network doctors, thus passing on the costs to participants.
The lawsuit alleges that the health system and its employee health plan violated ERISA and their fiduciary duties by using pricing methods that are "deceptive, misleading, arbitrary, illusory, unpredictable, and allow for inconsistent reimbursements.” According to the suit, Mayo and Medica did not provide accurate information to participants on how they calculate out-of-network reimbursement costs and deductibles. Additionally, the suit alleges that the online employee benefits portal provided inaccurate information on the plan’s provider network, leading members to seek care from out-of-network providers. Because the care was actually provided out-of-network, Mayo and Medica only covered a small portion of the bill.
While the suit notes that all providers who work for Mayo Clinic are covered in-network under the plan, the claim alleges that Mayo currently has a large sect of remote employees outside of the clinic’s area. These participants claim that outside of the clinic, they faced a “phantom network” of in-network doctors and other providers who are not accepting new patients, have retired, or do not actually accept their insurance. The claim also alleges Mayo doctors and executives are given an annual allowance of up to $10,000 a year to cover the difference between out-of-network and in-network coinsurance costs as well as dental and orthodontic expenses, while other employees are not given this allowance.
This claim continues a trend of fiduciary litigation against employers and their plans, coming off the heels of a recent lawsuit brought against Johnson & Johnson relating to their Pharmacy Benefit Manager Agreements. While we have seen a minor slowdown in the myriad of excessive fee suits in the retirement plan world, this uptick in health plan-related cases may warrant a checkup by plan sponsors on the operation of their health plans. Health plan sponsors may now have an increased risk of legal challenges by employees as negotiated prices for health care services become public through new transparency laws and regulations. Although many plan administrators of self-insured plans rely on their TPAs for much of the function of their health plans, when issues such as these arise, the employer ultimately remains responsible for the claims against the plan. To help mitigate these issues, plan sponsors should work to ensure that they have an ongoing process to monitor and review plan fees, participants costs, and network operations.
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