The U.S. Court of Appeals for the Sixth Circuit has revived an Employee Retirement Income Security Act (ERISA) lawsuit filed by a yacht company against Blue Cross Blue Shield of Michigan (BCBSM) over excessive healthcare fees. The appellate court held that the lower federal district court erred in dismissing the suit, alleging that BCBSM had violated its fiduciary duties by charging excessive fees and engaging in prohibited transactions. The case is Tiara Yachts Inc. v. Blue Cross Blue Shield of Michigan, Case Number 24-1223, U.S. Court of Appeals for the Sixth Circuit.
Tiara Yachts, Inc., a Michigan-based yacht design and manufacturing company, first sued BCBSM under ERISA in 2022. In its lawsuit, the company alleged that BCBSM had violated ERISA by overpaying claims to out-of-state healthcare providers and subsequently claiming savings after collecting the overpayments.
The district court dismissed the suit, finding that Tiara Yachts didn't adequately support its allegation that BCBSM acted as an ERISA fiduciary to Tiara Yachts' self-funded healthcare plan. The court also held that ERISA provided no remedies for the relief that Tiara Yachts sought.
A Sixth Circuit panel reversed the lower court on both counts, finding that Tiara Yachts plausibly alleged the breach of fiduciary duties under ERISA by showing that BCBSM retained control over plan assets. As a result, the appellate court's reversal also renewed Tiara Yacht's claims that BCBSM engaged in self-dealing in its "shared savings program," in which it utilized third-party contractors to recoup overpayments. BCBSM's control over assets also provided support for Tiara Yacht's allegations that the company had collected excessive fees from the shared savings program. Finally, the appellate panel rejected BCBSM's arguments that Tiara Yacht's claims were rooted in contract law rather than ERISA.
The Sixth Circuit's closely watched decision, which came after oral arguments in February 2025, is representative of a surge in health fee class action lawsuits involving ERISA plans. The U.S. Department of Labor (DOL) was set to argue as amicus in support of the yacht company, taking the position that permitting third-party administrators to prevent ERISA liability by using a contract would essentially eliminate fiduciary protections under ERISA. However, the DOL ceded its argument time back to Tiara Yachts after the change in administration earlier this year.
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