When Is An ERISA Plan Administrator An ERISA Plan Administrator?

Only when it is acting as such.  That, at least, is the answer from the Sixth Circuit in DeLuca v Blue Cross Blue Shield of Michigan (pdf), which affirmed the grant of summary judgment of a putative ERISA class-action.  The defendant Blue Cross Blue Shield of Michican (BCBSM), Michigan’s biggest insurer with 4.3 million members, has enormous negotiating power with Michigan hospitals and doctors.  (So large, in fact, that the DOJ recently filed an antitrust suit seeking to reduce its power in contract negotiations with Michigan hospitals.)  The plaintiff in Deluca argued that BCBSM breached its fiduciary duties as an ERISA Administrator when negotiating system-wide rates for its various coverage plans.  He claimed that the defendant’s negotiation resulted in a price increase for his ERISA benefit plan while lowering prices for other plans.

The Sixth Circuit roundly rejected that argument, holding that BCBSM was not acting as an ERISA Administrator when negotiating system-wide rates.  The Court held that Pegram v. Herdrich, 530 U.S. 211, 226 (2000), required separate consideration of “claims-processing and rate-negotiating roles.”  Changes made for the overall benefit of BCBSM’s members are not subject to the fiduciary duties that accompany the administration of specific ERISA plans.  The panel noted that its “economic advantage in the market would be destroyed” if BCBSM had to negotiate different rates for each ERISA plan.