backAppeals Court Revives Company’s Suit against Blue Cross for Breach of ERISA Fiduciary Duty
On May 21, 2025, the Sixth Circuit revived a company’s lawsuit against Blue Cross Blue Shield of Michigan (BCBSM) for breaching its fiduciary duties under ERISA as a third-party administrator (TPA). The plaintiff company, Tiara Yachts, Inc., alleged that BCBSM systematically overpaid provider claims and engaged in self-dealing by paying, and later recovering, overpayments. The Sixth Circuit opinion reversed the U.S. District Court for the Western District of Michigan’s dismissal of Tiara Yacht’s claims, holding BCBSM must face claims that it mismanaged and profited from the Tiara Yacht’s self-funded employee health plan.
Tiara Yachts offered a self-funded health plan to its employees, administered by BCBSM pursuant to an administrative services contract. The contract gave BCBSM authority to interpret plan terms, determine claim eligibility, and to reimburse providers using the self-funded plan assets. Tiara Yachts filed suit against BCBSM in July 2022 arguing that BCBSM improperly paid claims for two reasons. First, Tiara Yachts alleged that BCBSM promised to pay in-network Blue Cross rates for out-of-state claims, but instead paid many out-of-state provider claims at full billed charges. Tiara asserted that this practice, called “flip logic,” led to substantial overpayments. Second, Tiara Yachts alleged that BCBSM enrolled all self-funded clients, including Tiara Yachts, in a “Shared Savings Program.” Under the Shared Savings Program, BCBSM collected 30% of any overpayments that BCBSM recovered or prevented through third-party services. Tiara alleged that this program was a “self-dealing” conflict of interest because BCBSM could allow overpayments then profit from recovering them.
The U.S. District Court for the Western District of Michigan dismissed the case on a motion to dismiss, holding BCBSM’s actions did not qualify as fiduciary conduct under ERISA.
The Sixth Circuit reversed on the grounds that Tiara Yachts plausibly alleged that BCBSM was a fiduciary to the plan exercising “meaningful control” over plan assets, and that BCBSM profited off of its mismanagement of plan assets. For the Flip Logic theory, the court held BCBSM exercised control over plan assets by determining when and how to pay claims and so could be treated as an ERISA fiduciary. For the Shared Savings theory, the Sixth Circuit held BCBSM might be acting as a fiduciary because of BCBSM’s control over the pool of overpayments – a key component of its compensation. The court held that Tiara Yachts could recover damages on behalf of the plan under two provisions of ERISA’s civil enforcement provisions: 29 U.S.C. § 1132(a)(2), which allows certain parties to collect damages or “other equitable or remedial relief” on behalf of the plan, and 29 U.S.C. § 1132(a)(3), which provides for “appropriate equitable relief” such as restitution and disgorgement.
The case has been remanded to the district court for further proceedings. A copy of the Sixth Circuit opinion is available here.
Reporter, Alana Broe, Atlanta, +1 404 572 2720, abroe@kslaw.com.
White House Issues Memo Calling for Elimination of “Waste, Fraud, and Abuse” in Medicaid
On June 6, 2025, the White House issued a memorandum (“Memorandum”) directing HHS to take “appropriate action” to eliminate “waste, fraud, and abuse in Medicaid.” According to the Memorandum, the “waste, fraud, and abuse” in question includes tax arrangements between states and healthcare providers and Directed Payments under the Medicaid program. As part of this “appropriate action” the White House also seeks to limit Medicaid payment rates to Medicare levels. The complete memorandum can be reviewed here.
King & Spalding Client Alert:
MultiPlan Algorithmic Pricing Antitrust Claims Survive Motion to Dismiss
On June 3, 2025, a judge in the United States District Court for the Northern District of Illinois denied motions to dismiss antitrust claims in a multidistrict litigation (MDL) against MultiPlan, Inc. and major health insurance companies, including Aetna, Cigna, UnitedHealth, Blue Cross Blue Shield Association, and others. The plaintiffs, which include a consolidated class action and a consolidated group of direct-action healthcare providers, allege that MultiPlan—a healthcare technology, data, and insights company—colluded with insurers to fix reimbursement rates for out-of-network healthcare services. Defendants filed motions to dismiss the complaints, but the Court has allowed the federal and state antitrust claims, as well as state consumer protection claims, to proceed to discovery. The Court dismissed plaintiffs’ unjust enrichment claims. King & Spalding’s full Client Alert with additional insight is available here.
Also in the news:
CMS Rescinds ER Abortion Care Guidance
CMS rescinded previously-issued guidance that instructed hospitals to provide abortion services in emergency situations if the patient is experiencing an emergency and an abortion is the stabilizing treatment necessary to resolve that condition. The guidance clarified that the Emergency Medical Treatment and Active Labor Act protects a provider’s clinical judgment in emergency situations and preempts any state law that restricts the definition of an emergency medical condition. The guidance was issued after the U.S. Supreme Court’s ruling in Dobbs v. Jackson Women’s Health Organization that reversed Roe v. Wade.
Health Headlines’ prior analysis of the emergency abortion care guidance can be found here.
Upcoming events:
Dan Hettich and Amanda Hayes-Kibreab Speaking at AHLA Annual Meeting
June 30 – July 2, 2025 Join King & Spalding at the AHLA Annual Meeting in San Diego, California. Washington, D.C. Partner Dan Hettich will be speaking on the following topic: "A (Loper) Bright Future?: How the Demise of Chevron Deference Will Affect the Health Care Industry." Los Angeles Partner Amanda Hayes-Kibreab will be speaking on the following topic: "Is it protected...and do you want it to be? The Evolving Scope of Attorney-Client Privilege for In-House Counsel."The AHLA Annual Meeting Schedule is available here.
Editors: Chris Kenny and Ahsin Azim
Issue Editors: Taylor Whitten and Will Mavity