Federal Court Expands Participant Rights To Sue Insurer-Administrators Of Health Care Plans

A recent federal court decision has concluded that a participant in a selfinsured ERISA health plan has standing to sue the plan's insurer-administrator for breach of fiduciary duty and for monetary relief on behalf of the plan, regardless of whether the plaintiff can show that he personally suffered or will suffer a concrete injury as a result of the administrator's alleged misconduct. This holding, if upheld and followed, arguably expands the rights of participants to seek redress on behalf of the ERISA plan and could result in a substantial increase in the number of actions brought against ERISA plan fiduciaries.

In Deluca v. Blue Cross & Blue Shield of Michigan1, the plaintiff filed a class action lawsuit against Blue Cross and Blue Shield of Michigan ("Michigan Blue Cross"). In this case, Michigan Blue Cross administered a self-funded health benefit plan sponsored by a bank that employed the plaintiff's spouse. Plaintiff alleged that Michigan Blue Cross obtained the agreement of certain hospitals to accept lower payments from an HMO operated by Michigan Blue Cross in exchange for higher payments from self-funded ERISA plans administered by Michigan Blue Cross. Plaintiff claimed that the self-funded plan of which he was a participant accordingly paid excessive reimbursement rates and that the participants and beneficiaries of his plan paid excessive contributions, deductibles and/or co-payments.

It was unquestioned that plaintiff (as a participant in the plan) had a statutory right under ERISA to bring the action against Michigan Blue Cross. Michigan Blue Cross, however, argued on the basis of prior court decisions that the plaintiff lacked the requisite standing under Article III of the U.S. Constitution to pursue the claim. The U.S. Supreme Court has held that Article III requires, as a minimum, (1) that the plaintiff has suffered an "injury in fact," i.e., the invasion of a legally protected interest that is (a) concrete and particularized and (b) actual or imminent, (2) a causal connection between the alleged misconduct and the injury and (3) a likelihood that the injury can be redressed by a favorable decision.2 Michigan Blue Cross argued that plaintiff could not meet these requirements because (1) plaintiff had not incurred any greater costs on account of the alleged fiduciary violations (particularly since he enrolled as a beneficiary only seven days before the lawsuit), and (2) plaintiff could not establish a casual connection...