Excessive Fee Cases: Not Just for Retirement Plans Anymore

Litigation attorneys Chelsea McCarthy, Stacy Hooper, Sara Benson and Tahany Alsabahi co-authored a Lexis Nexis Practical Guidance® article examining a new trend in employee benefit plan litigation in which plaintiffs attempt to apply the theory of liability for retirement plan excessive fee cases to health plans. Specifically targeting arrangements with pharmacy benefit managers (PBMs), these lawsuits allege that plan sponsors breach their fiduciary duties under the Employee Retirement Income Security Act of 1974 (ERISA) by mismanaging medical and prescription drug coverage and causing plan participants to pay higher premiums, deductibles and prescription drug prices. Thus far, courts have dismissed claims for lack of standing, but, as the authors explain, challenges to PBM fees are unlikely to cease. Their article breaks down three examples of these cases and offers best practices for employers and plan sponsors, such as reviewing the fiduciary governance structure of a health plan and documenting the selection and oversight process for health plan vendors, especially third-party administrators.

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