DB Healthcare, LLC v. Blue Cross Blue Shield of Ariz., Inc., No. 14-16518, No. 14-16612 (9th Cir. 2017) is actually two cases, which involve reimbursement disputes between health care providers and employee health benefit plan administrators.  The Ninth Circuit Court of Appeals (the “Court”) decided the cases together, because they raise a common central issue: whether a health care provider designated to receive direct payment from a health plan administrator for medical services is authorized to bring suit in federal court under ERISA.  The Court considered two separate potential bases for such authority under ERISA’s civil enforcement provisions: direct statutory authority and derivative authority through assignment.  Although the contractual relationships between the health care providers and the plan administrators, and between the providers and the patients, under these two bases differ in relevant ways, the Court concluded that the providers cannot-under either base- enforce ERISA’s protections in federal court on either basis.

Why this conclusion?

Agreeing with other circuits, the Court reaffirmed that health care providers are not health plan beneficiaries who have direct statutory authority to sue for declaratory relief and money damages under ERISA section 502(a)(1)(B) or injunctive relief under ERISA section 502(a)(3).  Rather, a health care provider must bring claims derivatively, relying on its patients’ assignments of their benefit claims.  The Court held that the health care providers here, however, lacked derivative authority to sue, given the nature of the governing agreements and of the purported assignments.  In one case, the governing employee benefit plans contained non-assignment clauses that overrode any purported assignments.  In the other case, although the provider agreement permitted assignment, and payment authorization forms could be construed as assigning the provider limited rights, the provider’s claims fell outside the scope of the assigned rights.

There is uncertainty about how the Trump administration will ultimately treat the new definition of fiduciary for ERISA purposes, and the related new prohibited transaction exemptions, that have been promulgated by the U.S. Department of Labor (the “DOL”).  Accordingly, the DOL has issued Field Assistance Bulletin No. 2017-01 (the “FAB”), which sets out a temporary enforcement policy for these new rules.  The FAB is here, and says the following.


The FAB announces a temporary enforcement policy related to the DOL’s recent proposal to extend for sixty (60) days the applicability date of:

In a private letter ruling, dated October 11, 2016 and given number: 2016-0077, the Internal Revenue Service provided the following guidance for determining whether unused funds in a flexible benefit plan default to the U.S. Treasury, when a business ceases operations.

A flexible benefit plan (a type of “cafeteria plan”) is subject to requirements under section 125 of the Internal Revenue Code (the “Code”).  Section 125 does not require that unused funds revert to the U.S. Treasury when the employer ceases operations and the plan terminates.  In addition, how unused funds are disposed of when the plan terminates would depend on what the plan document provides about plan termination and the facts and circumstances at that time.  Proposed Treasury Regulations under section 125 of the Code, however, do set forth rules on the use of unused amounts forfeited by a plan participant with respect to an ongoing plan. Proposed Treasury Regulation § 1.125- 5(o)(1) provides that forfeitures may be:

  • Retained by the employer maintaining the plan,

In DOL Advisory Opinion 2017-01A, the U.S. Department of Labor (the “DOL”) was asked for an advisory opinion, on behalf of the Health Transformation Alliance (the “HTA”), on whether a program of administrative services created by HTA (the “Program”) is an “employee welfare benefit plan” within the meaning of ERISA section 3(1) or a “multiple employer welfare arrangement” (a “MEWA”) within the meaning of section 3(40).

In the Advisory Opinion, the DOL concluded that the Program is not an employee welfare benefit plan.  It said that such a plan does not include a program maintained by an employer (or group or association of employers) which -like the Program here- has no employee participants and does not provide covered benefits to employees or their dependents.  Rather than being established or maintained for the purpose of providing welfare benefits to participants and beneficiaries, the Program operates so as to facilitate the efficient establishment and operation of employee benefit plans by employer-members.

The DOL concluded, further, that the Program is not a MEWA.  This obtains because no component of the Program “offers or provides” any welfare benefit described in section 3(1) of ERISA to the employees of its member-employers.  In addition, the Program does not operate as a MEWA under ERISA section 3(40) because no component of the Program: (1) underwrites or guarantees welfare benefits, (2) provides welfare benefits through group insurance contracts covering more than one employer, (3) pools welfare benefit risk among participating employers, or (4) provides similar insurance or risk spreading functions.  Thus, although section 3(40), unlike section 3(1), does not condition MEWA status on the arrangement being established or maintained by any particular party, in the DOL’s view, offering employer-members the bundle of administrative services the ATA describes does not result in the Program constituting a MEWA, as defined by the statute.

In Hitchcock v. Cumberland University 403(b) DC Plan, No. 16-5942 (6th Cir. 2017), the Plaintiffs were appealing the order entered by the district court, granting the motion of the Defendants (namely, Cumberland University and its 403(b) plan) to dismiss their ERISA claim.  The Sixth Circuit Court of Appeals reversed the district court’s judgment, and remanded the case back to the district court.

In this case, the Plaintiffs were employees of Cumberland University (the “University”), and were participants in its 403(b) plan (the “Plan”).  The Plan is a defined contribution 403(b) plan.  In 2009, the University adopted a five percent matching contribution, whereby the University would match an employee’s contribution to the Plan, up to five percent of the employee’s salary.  On October 9, 2014, the University amended the Plan, retroactive to January 1, 2013, to replace the five percent match with a discretionary match, whereby the University would determine the amount of the employer’s matching contribution on a yearly basis (the “Amendment”).  The University also announced that the employer matching contribution for the 2013-14 year, and for the 2014-15 year, would be zero percent.

With regard to amending the Plan, the 2009 Summary Plan Description (the “2009 SPD”) states that an Employer cannot amend the Plan to take away or reduce protected benefits under the Plan.  That SPD also promises that all Plan Participants shall be entitled to obtain, upon request to the Employer, copies of documents governing the operations of the Plan, including an updated Summary Plan Description.  As of the date of oral argument in this case, January 25, 2017, the University had not produced a summary plan description subsequent to the 2009 SPD, despite Plaintiffs’ repeated requests, and had not provided formal written notice of the Amendment.  The Plaintiffs filed a class action against the Defendants, alleging among other things, an impermissible cutback of benefits and a breach of fiduciary duty, both in violation of ERISA.

In Tussey v. Abb, Inc., No. 15-2792, No. 16-1127 (8th Cir. 2017), a class of employees who participated in ABB, Inc.’s retirement plans-specifically, the “401(k) defined contribution savings plans”- accuse ABB and its agents (collectively, the “ABB fiduciaries”) of managing the plans for their own benefit, rather than the participants’. In an earlier appeal, the Eighth Circuit Court of Appeals (the “Court”) had directed the district court to “reevaluate” how the participants might have been injured if the ABB fiduciaries breached their fiduciary duties under ERISA when they changed the investment options for the plans.

Because the district court apparently mistook that direction for a definitive ruling on how to measure plan losses, and as a result entered judgment in favor of the ABB fiduciaries despite finding they did breach their duties, on this appeal, the Court vacated the judgment on that claim and remanded the case back to the district court for further consideration regarding whether the participants can prove losses to the plans. Because the Court reopened one of the participants’ substantive claims, the Court also vacated and remanded the district court’s award of attorney fees.

In Mayes v. Winco Holdings, Inc., No. 14-35396 (9th Cir. 2017), plaintiff Katie Mayes (“Mayes”), among other matters, was seeking COBRA benefits from defendant Winco Holdings, Inc. (“Winco”).  The district court granted summary judgment against Mayes, denying the benefits.  However, upon reviewing the case, a panel of the Ninth Circuit Court of Appeals (the “Panel”) found that there was a genuine dispute of fact regarding the true reason for the Mayes’ termination by Winco.  The Panel held that the district court therefore erred in granting summary judgment, because if Winco had fired the Mayes for discriminatory reasons, rather than gross misconduct, then Mayes could be entitled to COBRA benefits.

In this case, Mayes had worked at Winco, an Idaho Falls grocery store, for twelve years.  During her final years at Winco, Mayes supervised employees on the night-shift freight crew.  On July 8, 2011, Mayes was fired for taking a stale cake from the store bakery to the break room to share with fellow employees and telling a loss prevention investigator that management had given her permission to do so.  Winco deemed these actions theft and dishonesty.  It also determined that Mayes’ behavior rose to the level of gross misconduct under the store’s personnel policies.  Winco denied Mayes and her minor children benefits under COBRA and this suit was filed.

In deciding the case, the Panel noted that generally, COBRA entitles an employee with employer provided health insurance to elect continued coverage for a defined period of time after the end of employment. See 29 U.S.C. § 1161(a).  An employee is not entitled to this benefit if she is terminated for “gross misconduct,” but the statute does not define “gross misconduct.”See 29 U.S.C. § 1163(2).  In this case, said the Panel, Mayes presented both direct and indirect evidence that the reasons stated for her termination were pretextual, and the Panel concluded there is a genuine dispute of material fact regarding the true reason for her termination.  It said that, if Winco fired Mayes for discriminatory reasons, Mayes may be entitled to COBRA benefits, and concluded that the district court therefore erred in dismissing Mayes’ COBRA claim at summary judgment.  The Panel remanded the case back to the district court.

In Rodriguez-López  v. Triple-S Vida, Inc., No. 15-2413 (1st Cir. 2017), the plaintiff, Nilda Rodríguez-López (“Rodríguez”), appeals from the district court’s grant of summary judgment in favor of defendant, Triple-S Vida, Inc. (“Triple-S”). The district court reviewed and sustained the denial of Triple-S, the claims administrator, of Rodríguez’s claim for long-term disability (“LTD”) benefits (from an ERISA covered plan) under the deferential arbitrary and capricious standard.  Because the plan contained no clear delegation of authority to Triple-S, the First Circuit Court of Appeals (the “Court”) held that Triple-S’s decision was not entitled to deference. Accordingly, the Court reversed and remanded the case back to the district court to decide the case under the de novo standard of review.

In Williams v. FedEx Corporate Services, No. 16-4032 (10th Cir. 2017), Steven Williams (“Williams”) alleges that his former employer, FedEx Corporate Services (“FedEx”), violated the Americans with Disabilities Act (the “ADA”) by discriminating against him based on his actual and perceived disabilities, and by requiring his enrollment in the company’s substance abuse and drug testing program.  Williams further alleges that Aetna Life Insurance Company (“Aetna”), the administrator of FedEx’s short-term disability plan, breached its fiduciary duty under ERISA when it reported to FedEx that Williams filed a disability claim for substance abuse.  Both FedEx and Aetna filed motions for summary judgment, which the district court granted.

Upon reviewing the case, the Tenth Circuit Court of Appeals (the “Court”) acted as follows. As to the district court’s  grant of summary judgment on the ADA claim, the Court  affirmed the judgment in part, and reversed it in part, thereby remanding the case back to the district court on the matter.  As to the district court’s grant of summary judgment on the ERISA claim, the Court concluded that Williams has not established that Aetna failed to act with the care required by ERISA fiduciaries. Accordingly, the Court affirmed the district court’s judgment in favor of Aetna on the ERISA matter.

In Ohio v. U.S., No.16-3093 (6th Cir. 2017), the Sixth Circuit Court of Appeals (the “Court”) was faced with the question of whether one of the Affordable Care Act’s tax provisions applies to state government employers with the same force that it applies to private employers.  The plaintiffs are the State of Ohio, and several of its political subdivisions and public universities (the “State”).  The plaintiffs filed suit against, inter alia, the United States Department of Health and Human Services (“HHS”), alleging that the Federal Government illegally collected certain monies from the State in order to supplement the Affordable Care Act’s Transitional Reinsurance Program (the “Program”).

Arguing that the Program’s mandatory payment scheme applies only to private employers and not to state and local government employers, the State sought a refund of all payments made on its behalf and a declaration that the Program would not apply to the State in the future.  The State also argued that application of the Program against the State violated the Tenth Amendment to the United States Constitution and principles of intergovernmental tax immunity.  The district court, in a thorough and reasoned opinion, granted a motion to dismiss filed by the United States, and denied a motion for summary judgment filed by the State. The district court ruled that the Program applies to state and local government employers just as it applies to private employers, and that the Program as applied to the State does not violate the Tenth Amendment.  The Court affirmed the district court’s rulings.