Health Benefit Liability: Schlichter Class Action Lawsuits
In the world of employee benefits, a seismic shift is underway, and it's causing tremors of concern for some of America's biggest companies. Law firm Schlichter Bogard, renowned for its pioneering work in retirement plan litigation, has set its sights on a new frontier: employer-sponsored health benefit plans. Schlichter's current ads soliciting participants for class-action lawsuits against several major corporations are sending shockwaves through the industry.
The companies in Schlichter Bogard's crosshairs are no small fish; the current list includes:
The lawsuits are likely to allege a breach of fiduciary duty under the Employee Retirement Income Security Act (ERISA). This move is significant for several reasons.
First and foremost, the fact that these ads are running publicly highlights a growing trend in the employee benefits industry: the litigators are coming. Schlichter Bogard's success in the retirement space, where they've secured judgments and settlements exceeding $1.5 billion, did not go unnoticed. Other law firms followed suit, eager to replicate Schlichter Bogard's achievements, and 401(k) litigation became commonplace. The same exact thing is happening in the health benefits industry right now.
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While it's probable that most of these employers will opt to settle out of court rather than face protracted legal battles, this list of lawsuits will prove to be the "tip of the iceberg." As more law firms recognize the potential for lucrative settlements in health benefit plan litigation, a cascade of similar cases is likely to follow. Just as we've witnessed in the retirement space, this legal scrutiny could reshape the health benefits industry.
Over the past two decades, fiduciary breach lawsuits targeting retirement plans have exerted immense pressure on employers. The result? A transformed 401(k) industry with lower fees, increased participation and transparency, and improved investment performance. The combined effects of these lawsuits have been nothing short of revolutionary.
While I don't have a crystal ball, it's tempting to speculate that a similar transformation may be on the horizon for the health benefits space. If history is any indication, this wave of litigation could drive down health benefits costs, enhance the quality of care, and establish transparency as the new standard.
However, the road ahead will likely be rocky. Legal battles, settlements, and compliance adjustments are all part of the process. To navigate this uncertain terrain, employers should adopt fiduciary best practices promptly. Documenting adherence to the requirements of ERISA, the Consolidated Appropriations Act (CAA), Transparency in Coverage regulations, and other relevant laws and regulations is crucial.
Mark my words, Schlichter Bogard's foray into health benefit plan litigation is a harbinger of change in the industry. While lawsuits against prominent corporations may grab headlines, they are merely the start of a broader movement. Employers would do well to embrace fiduciary best practices and prepare for a shift towards increased transparency, improved care quality, and reduced costs in the world of health benefits. The journey may be challenging, but the destination holds the promise of a better future for employees and employers alike.
Independently Investigating Healthcare Costs and Quality to Improve the Business of Healthcare
9 个月With the J&J lawsuit, your prophecy is coming true . . .
Good article Jed, although I would note that as you mentioned, it’s been a year and a half since you first brought this up, & Schlicter has yet to file a single lawsuit. I agree employer suits will come, but urge you to take a look at the spate of lawsuits that HAVE been filed to date. Prudent fiduciaries have taken to offense in this area, trying to clean things up themselves so they don’t have the same situation we saw in the 401(K) world. The suits filed by Owens-Minor, Mass Laborers (I and II), Kraft-Heinz, Bricklayers CT Local 1 & Sheet Metal Workers CT Local 40 are great examples of employers/trustees being proactive rather than just reactive. Many fiduciaries may find, when getting their fiduciary house in order, that the best way to minimize their own risk is to file a lawsuit or initiate other dispute resolution mechanisms on behalf of the plan & plan participants against whatever party is preventing them from acting as proper fiduciaries. While I think some of what’s happening here will play out similar to how it did in the 401(K) space, I also think it’s worth noticing the uniqueness of lawsuits to date, where it is the employers/trustees driving fiduciary litigation, instead of waiting to be sued.
Co-Founder @VirtualWorkerNow | Placed 1,000+ VAs I Co-Founder @DealRaise I Raised $100+ Million for Startups I Avid Reader I Runner I Host of The Socratic CEO Podcast
1 年Your prediction about a tidal wave of class action lawsuits over health benefits is coming to pass. This is a concerning trend, but it also highlights the importance of transparency and accountability in the health insurance industry. Employees and consumers should be aware of their rights and should not hesitate to challenge unfair practices by health insurance companies. There are a number of resources available to help people understand their rights and file complaints, such as the National Association of Insurance Commissioners and the Centers for Medicare & Medicaid Services. What steps can employees and consumers take to protect their rights and hold health insurance companies accountable?
President @ Enrichly HR, Inc. | 37-year Benefits Industry Leader
1 年So why would employers stay in the health insurance business? Healthcare cost management is a misplaced responsibility. Employers can be better fiduciaries by getting out of the middle. Give people money and let them buy on their own through an ICHRA. And then support legislation that would make the purchase of an individual health insurance policy a pre-tax expense getting it out from under the umbrella of an employer. If we get employers out of the middle then consumers can drive the market. This article is just another sign that the system is broken, yet there are so many who continue to support it. Protecting employer-based insurance is protecting the status quo and a broken system. We don't need litigation to drive down costs. What a crazy idea. What we need is a change in legislation.
Chief Executive Officer at Innovu, LLC
1 年Very wise observations Jed! For those of us that have seen the before and after of transparency and disclosure laws/lawsuits in the retirement industry it is very clear that significant improvement for the plan and participant will be the result.