13 November 2023

11th Circuit Affirms District Court’s Approval of the BCBSA $2.67 Billion Settlement

On October 25, 2023, the U.S. Court of Appeals for the 11th Circuit affirmed a district court’s approval of the $2.67 billion class action settlement reached by the Blue Cross Blue Shield Association (“BCBSA”) and the class plaintiffs.  In this recent decision, the 11th Circuit affirmed the earlier approval by a district court of both the $2.67 billion settlement and the injunctive relief measures included in the agreement.  (See our previous client alert discussing the proposed settlement here, our webinar discussing the proposed settlement here, and our client alert discussing the district court’s approval here.)

Background and ERISA Fiduciary Duties

Under the terms of the settlement, BCBSA agreed to pay $2.67 billion in damages—minus attorneys’ fees—and agreed to various reforms to resolve alleged anti-competitive business practices. The settlement was approved by a federal district court in the Northern District of Alabama on August 9, 2022. Objectors to the settlement appealed to the 11th Circuit and made multiple arguments against the settlement.  One argument was that the settlement should not be approved because the plan of distribution fails to address the employers’ disbursement obligations under ERISA, and thus, could lead to violations of ERISA by employers and plan fiduciaries.

However, the 11th Circuit rejected this argument.  Specifically, the 11th Circuit held that the fear of speculative ERISA violations is no reason to reject the settlement.  Nothing in the settlement agreement changes ERISA rights.  All ERISA duties still apply, and all ERISA fiduciaries must comply with those duties.  Further, the 11th Circuit noted that plans and employees retain their right to sue under ERISA.  Ultimately, the 11th Circuit held that the district court did not abuse its discretion and affirmed the district court’s approval of the $2.67 billion settlement.

Next Steps

Once the deadline for additional appeals is exhausted in early 2024, employers and individuals may begin to receive proceeds from the settlement fund.  Interested employers should check the Blue Cross Blue Shield Settlement Website for updates.  However, employers should be aware that they may have fiduciary duties under ERISA with respect to the use of any proceeds from the settlement fund.  Under ERISA, any portion of the settlement proceeds that are considered to be “plan assets” must be used for the exclusive benefit of participants in the plan (and their beneficiaries), or to defray the reasonable administrative expenses of the plan.

To date, the DOL has not issued any guidance regarding the proper treatment of claim proceeds from this particular lawsuit.  However, the DOL has previously issued guidance related to the treatment of medical loss ratio (“MLR”) rebates received under the Affordable Care Act.  Unless specific guidance is issued related to the BCBSA settlement, employers may want to use the MLR guidance as a reference when determining how to calculate what portion of the BCBSA settlement proceeds should be considered “plan assets,” and how those funds can be used.  We discussed the existing MLR guidance in-depth in our previous client alert on the BCBSA settlement, which is available here, and in our webinar on this topic, which is available here.  We are also available to assist employers determine how the existing MLR guidance or any upcoming DOL guidance may apply to their specific situations.

If you have any questions, please contact a member of the Miller Johnson Employee Benefits and Executive Compensation practice group.