Court: ERISA Plan Has Fiduciary Duty to Negotiate Provider Rates
May 06, 2025
On April 21, 2025, in Mejia v. Credence Mgmt. Solutions, a federal court in the Central District of California denied the defendants’ motion for judgment on the pleadings. The court determined that the plaintiff had grounds to bring this suit due to allegations that the defendants had a fiduciary duty to their health plan to negotiate provider rates, and they violated that duty.
The plaintiff is an employee of the defendants and participated in the company healthcare plan that the defendants' carrier administered. The plaintiff underwent medical procedures which cost more than $100,000. The defendants paid less than $2,000 and refused to negotiate with the medical providers for the rest, leaving the plaintiff with the bill for the difference.
The plaintiff filed the lawsuit against the defendants, alleging that they had a fiduciary duty to attempt to negotiate the rest of the bill. The defendants argued that there is no such duty required of them in the plan documents, and attempting to negotiate the fees would be costly to the plan and would be a violation of their duty to act prudently. The defendants then filed a motion to dismiss the case based on the plaintiff’s failure to establish a claim.
The court found that, although there was no express duty to negotiate provider rates in the plan documents, the plan is governed by ERISA and that statute imposed a fiduciary duty on defendants to provide benefits to participants that is broader than the contractual duties imposed by individual ERISA plans. The court also found that it would not necessarily hurt the plan if the defendants had just attempted to negotiate the fees, although it is too early in the litigation to determine whether attempting to negotiate would have harmed plan assets. Accordingly, the court denied the motion and allowed the case to continue.
Employer Takeaway
This is another example of a case involving fiduciary duties, stressing the importance of fiduciary governance of health plans. It is important to keep in mind that this is a district court ruling that may be appealed and that employers should consult with their attorneys if they have questions concerning the applicability of this case to any issue with their own plans. For further information concerning fiduciary governance, PPI clients can download a copy of our publication, ERISA Fiduciary Governance: A Guide for Employers, from the Client Help Center.
Mejia v. Credence Mgmt. Solutions