ERISA and other claims against noncompliant group health plan for ACA violations dismissed

Participants in a group health plan whose terms violated both ERISA and the Patient Protection and Affordable Care Act (ACA) lacked constitutional standing to sue the plan, the Sixth Circuit ruled. The mere fact that the participants paid money into a noncompliant plan did not satisfy the injury-in-fact requirement of constitutional harm necessary to establish standing, the appeals court held, finding the court below had properly dismissed their complaint.

An Ohio dairy company contracted with an employee benefits plan to provide medical coverage for its employees. The terms of coverage were recited in a participation agreement signed in 2014. The company, its president, and an employee filed suit on their own behalf and on behalf of a class of similarly situated employees alleging that prior to entering into the agreement, they received assurances from individual plan trustees that the plan would comply in all respects with federal law including ERISA and the ACA. However, notwithstanding the ACA’s statutory mandate that group health plans eliminate per-participant and per-beneficiary pecuniary caps for annual and lifetime benefits, the plan maintained such restrictions, the plaintiffs alleged. Consequently, the company purchased supplemental health insurance benefits to fully cover its employees. The plan trustees did not dispute that the plan had benefit caps, but argued that the plan was exempt from the requirement that such caps were to be eliminated.

The plaintiffs filed a seven-count complaint against the plan alleging violations of ERISA, ACA, the LMRA, and breach of contract claims. The district court dismissed the complaint for failure to state a claim and for lack of standing. The Sixth Circuit affirmed.

ERISA claim. The plaintiffs alleged that by failing to comply with ACA provisions enjoining annual and lifetime limitations on benefits, the plan violated their rights under ERISA. They filed suit for monetary and injunctive relief under ERISA, which permits a civil action to be brought in federal court by a participant or beneficiary of a benefits plan in order to recover benefits due under the terms of the plan, and to enforce rights under the terms of the plan, or to clarify rights to future benefits under the terms of the plan.

No injury-in-fact. The district court correctly dismissed the first two claims for lack of standing. To have Article III standing, the participants were required to show that they possessed a sufficient personal stake in the outcome of the controversy as to warrant the exercise of a federal court’s remedial powers. The element of injury-in-fact was required to be pleaded as a de facto injury, the appeals court noted, and merely alleging a violation of their ERISA rights did not satisfy that obligation. Even assuming that an injury was sufficiently particularized in the complaint, the participants still needed to show that the deprivation of a statutory right was accompanied by some concrete interest.

Class action does not confer standing. The participants argued that certain class members suffered from conditions that previously required medical expenses in excess of the plans’ benefit caps. They also claimed that some employees will in the future choose to delay important medical procedures in order to avoid exceeding the cap. However, notwithstanding the class allegations, the participants had to demonstrate individual standing with regard to the plan—the requisite standing cannot be acquired merely by virtue of bringing a class action. The individual participants never showed precisely what concrete harm they suffered as a result of the violations of their ERISA rights. By merely arguing that the plan imposed pecuniary benefits limitations, without alleging anything further, the plaintiffs did not satisfy the concreteness prong of the injury-in-fact requirement of Article III.

Payments not an injury. The participants also cited their remitting of funds into the noncompliant plan as a constitutional injury. However, the appeals court said, the mere fact of paying into a noncompliant plan, if an injury at all, was conjectural and hypothetical. Because the alleged injury was neither concrete nor particularized, it did not satisfy the injury-in-fact requirement.

Prospective liability no injury. Although ERISA imposes on plan fiduciaries a duty to act in accordance with the documents and instruments governing the plan, it was not sufficient to merely allege the plan’s deficiency. Rather, the participants needed to show that a specific fiduciary duty or right owed to them was infringed. Although misconduct by the administrators of a benefit plan can create an injury if the misconduct creates or enhances a risk of default by the entire plan, the participants in this case made no showing of actual or imminent injury to the plan itself. The complaint alleged that the actions of the plan fiduciaries exposed the plan to prospective liability in the amount of $15 million, asserting that the risk of an enforcement action was itself sufficient to constitute an injury. However, in the absence of any evidence that penalties had been levied, paid, or even contemplated, the risk-based theories of standing were unpersuasive.

False representations. Finally, the plaintiffs alleged that plan representatives knowingly made false statements by promising that the plan would comply in all respects with ERISA and welfare benefit laws, including the ACA. However, their complaint merely referred to a promise that the plan would comply in all respects with ERISA and welfare benefit laws, including without limitation the ACA. At no point did the complaint identify specific statements from particular trustees at specific times which constituted the purportedly false promises and assurances which the participants claimed to have relied upon. Citing the heightened pleading standard required to state a fraud claim, and noting that the ‘time, place, and content’ of the alleged misrepresentations were not pleaded, the court dismissed the false representation claims.

SOURCE: Soehnlen v. Fleet Owners Insurance Fund, (CA-6), No. 16-3124, December 21, 2016, per curiam.

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