A recent case demonstrates the perils of missing a claim submission deadline under a self-insured medical plan. In a recent case, a North Carolina district court on May 1, 2020, denied a motion to dismiss on allegations that a third-party administrator (TPA) had failed to timely submit a claim to the stop-loss carrier despite instructions from the employer and the plan. Technibilt Group Insurance Plan v. Blue Cross and Blue Shield of North Carolina, 438 F. Supp. 3d 599 (W.D.N.C. 2020). In that case, Blue Cross and Blue Shield of North Carolina (BCBS) served as the claims administrator of the Technibilt Group Insurance Plan (the Plan).
In November 2018, a Plan participant that had been gravely ill passed away after accumulating claims in excess of $1.6 million during the 2018 plan year. Because the Plan sponsor, Technibilt, Ltd. (“Technibilt”), had stop loss insurance that only covered claims paid during the plan year, Technibilt notified BCBS of the impending end-of-year deadlines and the substantial monetary implications of failing to pay the claims by the end of the year.
While the date regarding when BCBS received notice was debated, ultimately BCBS paid half of the claims in early January 2019. That portion of the claim was not covered by Technibilt’s stop loss policy, leaving the Plan and Technibilt to make up the difference. BCBS alleged that it did not actually receive notice until December 31st, 2018, but plaintiffs allege they notified BCBS much earlier.
The Plan and Technibilt then sued BCBS, alleging, in part, that BCBS breached its fiduciary duty by failing to pay the claims within the time requested by Technibilt. BCBS made a motion to dismiss the claims, arguing, in part, that plaintiffs could not prove that BCBS was a fiduciary regarding the timing of payment of claims. Noting the early stage of the action, the court denied BCBS’s motion to dismiss and tentatively found that BCBS’s “control respecting disposition of the Plan’s assets, could plausibly make [BCBS] a functional fiduciary with respect to the handling of the extraordinary and urgent circumstances” under the issue at hand. Technibilt, at 605. As a result, even assuming the payment was made within BCBS’ standard timeframe, the court held that the facts and circumstances developed in discovery could show that “‘sometimes just ok is not ok.’” Id.
This case raises many issues relating to who might be ultimately responsible when claims are not timely processed. In that regard, it is critical for employers and TPAs to establish good procedures for impending deadlines. Clear communication between sponsors and TPAs are also important, especially in extraordinary circumstances like the one at issue in the case. Finally, this case raises the importance of carefully delineating the obligations of each party in the applicable Administrative Services Agreement as that document may eventually have a critical role in the ultimate outcome of the case. Please contact the following if you have any questions: Henry Talavera at email@example.com, or Rafael Ramos at firstname.lastname@example.org.