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Blue Cross Blue Shield Accused of Charging Employers Hidden Fees

— August 25, 2017

Blue Cross Blue Shield Accused of Charging Employers Hidden Fees

Blue Cross Blue Shield of Michigan (BSBSM) has been sued more than 30 times this month.  The company is under attack by employers who claim the insurer took unauthorized fees from their health plans.  The lawsuits were filed specifically between August 9th and August 11th in Michigan’s federal court.

The employers have accused BSBSM of charging hidden fees to their health plan assets as a way to improve the company’s financial position without hurting its relationship with its customers.  

Since the 2014 appeals court decision that held Blue Cross liable for such conduct under the Employer Retirement Income Security Act (ERISA) and forced the insurer to pay $6 million, more than 200 similar cases have been filed against the company.  Michigan based law firms Varnum LLP and Michigan Health Lawyers are leading the cause.  

Aaron Phelps, a partner with Varnum LLP based in Grand Rapids, said his firm will “continue to recover the fraudulent overcharges into the future,” adding that Blue Cross’s conduct has affected “hundreds, if not thousands, of businesses” and many of the recent claims are identical to the ones for the company was held responsible three years ago.

Blue Cross Blue Shield Accused of Charging Employers Hidden Fees
Image Courtesy of Nik Macmillan

The list of employers seeking legal action is diverse and includes those in the auto industry, as well as hospitals, colleges, and companies in the plastics industry.

The underhanded business tactics Blue Cross has been accused of dates back at least to the 1980s, according to court documents.  When surcharges imposed by the insurer proved to be unpopular amongst consumers and caused the company to lose customers in the late 1980s, BCBS replaced the disclosed fees in 1993 with hidden markups no longer visible to customers.  In allowing lawsuits to proceed many years after the fees were issued, the Sixth Circuit ruled the concealment warranted extending the relevant statute of limitations.

This recent slew of lawsuits has occurred primarily in response to a deadline identified by a district court after Phelps’ filing. That court held that lawsuits based on such allegations would be timely “until at least” Aug. 12th.

In one such lawsuit, filed by Williams Chevrolet, Inc., represented by Phelps, the reasoning behind the filing reads as such, citing the 2014 judgment and BCBSM’s violation of ERISA as grounds to seek relief: “Williams entrusted BCBSM to administer its self-insured employee benefit Plan. Pursuant to their contract, Williams sent large sums of money to BCBSM, which BCBSM was supposed to use to pay employee health care claims. Williams recently learned that, contrary to their contract and numerous specific claims reports, BCBSM also skimmed additional administrative fees…to pay claims. BCBSM’s misappropriation of Plan assets is a clear violation of the Employee Retirement Income Security Act (ERISA) of 1974…BCBSM’s scheme has already been adjudicated by the United States Court of Appeals for the Sixth Circuit as fraudulent and unlawful. Plaintiffs bring this suit to recover the misappropriated funds and obtain all other relief to which they are entitled.”

More lawsuits are likely to be identified as litigation against the insurer continues.


Blue Cross Michigan Hit With Flurry of ERISA Lawsuits


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