Insights

District Court Finds TPA Not Responsible for Determining Plan Eligibility Under Administrative Services Agreement


On March 8, 2018, the United States District Court for the Northern District of Alabama (the court) ruled in favor of Blue Cross Blue Shield of Alabama (BCBS) in Birmingham Plumbers and Steamfitters Local Union No. 91 Health and Welfare Trust Fund v. Blue Cross Blue Shield of Alabama, 2018 WL 1210930 (N.D. Ala. 2018). In this case, the Union alleged that BCBS had breached their fiduciary and contractual duties by continuing to pay a participant’s claims on a primary basis after the participant had received 30 months of treatment for end stage renal disease (ESRD).

As background, Medicare generally becomes the primary payer once a participant has been receiving ESRD treatment through the plan for 30 months. In this situation, the Union claimed that BCBS knew that the participant was diagnosed with ESRD and subsequently treated for 30 months and should’ve known that he was eligible for Medicare. BCBS argued that while they were a fiduciary as the plan’s TPA, they were not a fiduciary for purposes of determining plan eligibility (and more specifically, eligibility for Medicare).

The court agreed, asserting that the Administrative Services Agreement (ASA) clearly made the employer the party that was responsible for ascertaining participant eligibility (under the plan and Medicare). As such, it was the employer who should’ve notified BCBS that this employee was eligible to enroll in Medicare coverage. Additionally, BCBS’ fiduciary duty of administering the plan’s claims was limited by the eligibility information provided by the employer. As a result, the court dismissed the Union’s claims against BCBS.

Although we don’t generally report on federal district court cases, we thought this was a good case to remind employers of their responsibilities in determining the eligibility of their participants. This would not only be important in the event that a participant is treated for ESRD, but could also occur if a dependent were to age out of the plan. Ultimately, employers should be aware of the responsibilities assigned to them through the ASA or any other plan documents, as those are the documents that a court would rely upon should a dispute arise.

Birmingham Plumbers and Steamfitters Local Union No. 91 Health and Welfare Trust Fund v. Blue Cross Blue Shield of Alabama »