Goodwin Insights April 08, 2021

Eighth Circuit Court of Appeals Affirms Decision that Health Plan Administrators Were Not Fiduciaries

Key Takeaway: The Eighth Circuit recently ruled that a third-party administrator was not a fiduciary to a health plan where it made recommendations regarding payments, but the plan sponsor retained final authority to approve or deny the recommendation and then make the payments.

On February 1, 2021, the Eighth Circuit Court of Appeals affirmed a decision that had granted summary judgment in favor of the defendants on the ground that the defendants, third-party administrators of a health plan, were not ERISA fiduciaries with respect to the conduct at-issue. The plaintiff, a health plan’s sponsor, had alleged that third-party plan administrators of the sponsor’s self-funded health care plan had breached their fiduciary duties under ERISA. The sponsor alleged that the third-party administrators, which were responsible for reviewing medical bills and making recommendations to the sponsor regarding the amount to pay the medical providers, overcharged the sponsor and received undisclosed “kickback” payments for these services in breach of their fiduciary duties.

The Eighth Circuit affirmed the district court’s decision that the defendants were not fiduciaries, finding that they did not exercise control over the plan’s assets. Instead, the sponsor retained the final authority regarding whether to accept the recommendations from the administrators concerning the payment amount. Indeed, out of all of the defendants, only one was a fiduciary in any capacity, and that was limited to making benefit determinations — which none of the allegations in the case even addressed.

This case is Cent. Valley Ag. Coop. v. Daniel Leonard, No. 19-3044, in the U.S. Court of Appeals for the Eight Circuit. The decision is available here.