NC Hospital Settles Health Benefits Suit

July 29, 2011 ( - N.C. Baptist Hospital will pay nearly $5.4 million to settle a federal lawsuit that accused MedCost, its group health plan, of requiring employees to pay more in fees for health benefits than other corporate clients paid.

The Winston-Salem Journal reports that the lawsuit, filed in 2009, said Baptist “violated the duties, responsibilities and obligations imposed upon them as a fiduciary” under the federal Employee Retirement Income Security Act. ERISA prohibits most employers from using companies they own to provide health benefits for employees unless they can show they are putting workers’ interests first.  

“Plaintiffs allege that because NCBH was, itself, a health-care provider, its incentive was to choose the network that provided it the greatest reimbursement,” the lawsuit said, according to the Journal. The plaintiffs also said the arrangements help ensure “that large networks did not gain additional market share, which would drive down future reimbursements that NCBH and other health-care providers might receive.”  

The suit also claimed that by selecting MedCost as the plan’s third-party administrator, Baptist indirectly caused employees to pay more for medical services.  

In the 2009 class-action notice, Baptist said selection of MedCost was a plan-sponsor function, not a fiduciary function, and therefore its actions were not governed by ERISA.  

“NCBH alleges that cost is only one factor in a prudence analysis, and that MedCost provided superior service or capabilities in other areas that justified any increase in cost,” Baptist said in June 2009.  

However, in October 2009, Baptist agreed to raise its plan discount for inpatient services to at least 36.6% and outpatient services to at least 35% for 2009 and 2010. Baptist declined to comment on whether it is providing a similar discount in 2011.  

It lowered the co-payment for inpatient services from its provider network by 13%, or at least by $5, and lowered the co-payment for outpatient services by 15%, or at least by $5, also for 2009 and 2010. The percentage that participants pay in total premiums cannot be increased through 2014.  

The news report said, in October 2009, U.S. Labor Secretary Hilda Solis ruled that once the fiduciary’s role as monitor ends December 31, 2014, Baptist should not use MedCost Benefit Services LLC and MedCost LLC as a network or administrative-services provider for the plan without obtaining an exemption from the U.S. Labor Department. The exemption would be required for Baptist to use MedCost with the existing plan, or any ERISA-covered plan that it sponsors.  

About 11,000 people are affected by the settlement involving MedCost and certain affiliates’ group health plan.