A recently filed lawsuit against Northwestern University and its health plan fiduciaries raises novel claims that could be problematic for employers that offer multiple medical benefit options, if the suit gains traction. The lawsuit alleges that the plan’s fiduciaries violated ERISA and breached their fiduciary duties by offering employees a medical plan option that provided insufficient value compared to an alternative option offered to employees. The plaintiffs allege that the “premium” plan option—which charges higher premiums in exchange for lower deductibles and cost sharing—is financially dominated by the “value” plan option because the lower cost sharing does not sufficiently outweigh the higher premium. This lawsuit is still in the early stages, and the court has yet to rule on whether the plaintiffs have plausibly stated a claim, let alone consider the merits of the allegations.
The lawsuit appears to take issue with the common and reasonable practice of offering employees multiple medical benefit options so that employees can weigh the tradeoffs of premium cost versus cost sharing levels based on their personal circumstances. Some employees may value paying a lower premium in exchange for higher deductibles, copays, and coinsurance while other employees may prefer paying a higher premium in exchange for lower cost sharing obligations. Allowing employees to make this choice for themselves doesn’t cause plan fiduciaries to violate their fiduciary duties just because some employees think one option is superior. If this lawsuit is successful or spawns other similar lawsuits that survive motions to dismiss, employers that offer employees a choice among multiple medical plan options could decide that it is not worth the additional costs and exposure to provide employees multiple options.
