: : Employer Sues Stop Loss Carrier and Express Scripts Alleging Fiduciary and Contractual Breach

“Express Scripts moves for summary judgment on Henkel’s claim for breach of fiduciary duty. Henkel alleges that Express Scripts breached its fiduciary duty not only by failing to adhere to the coverage criteria in the prior authorization policies but also by approving the subsequent claims. . . . Here, a reasonable jury could conclude that, in the totality of circumstances presented here, Express Scripts was obliged to review documentation of lab results to justify the payment of tens of millions of dollars in pharmacy benefit claims.”

Henkel of Am., Inc. v. Reliastar Life Ins. Co. (D. Conn. 2021)

The Henkel case features a squaring off between an employer of a self funded health plan, Henkel, on the one hand, and both its stop loss carrier, Reliastar, and its prescription drug claims administrator, Express Scripts, on the other.

$50 Million in Prescription Drug Costs For Two Employees

Plaintiff Henkel of America, Inc. (“Henkel”) has paid about $50 million in prescription drug costs for two of its employee health plan participants (“the participants”) who suffer from a rare medical condition known as Hereditary Angiodema (“HAE”). Henkel filed a lawsuit to recoup most of these costs from its stop-loss insurer, defendant ReliaStar Life Insurance Company (“ReliaStar”), or in the alternative from defendant Express Scripts, Inc. (“Express Scripts” or “ESI”), the claims administrator retained by Henkel who approved the prescription drug claims.

The Stop Loss Carrier Balks

The controversy ensued after the stop loss carrier hired a consultant to review approval of some very expensive drugs by Express Scripts. The consultant o

ReliaStar paid the reimbursement claims for the subject drugs from 2015 but then hired a consultant to perform an independent audit of the most expensive claims that arose in 2016 and 2017. After an investigation, the consultant concluded that the prescription drug claims were not covered by the Plan.68 ReliaStar declined to pay the participants’ claims from 2016 and 2017 on the basis of the consultant’s review.”

Express Scripts Files Motion for Summary Judgment

This most recent opinion arises in the context of a motion for summary judgment filed by Express Scripts. The court looked a several preliminary issues – none of these went in its favor:

(1) whether it is proper for me to consider the opposition papers filed by ReliaStar (in addition to those filed by Henkel); (2) whether I should apply a de novo or abuse-of-discretion standard of review; and (3) whether my review should be limited to what Express Scripts claims to be the administrative record.

The answers were – (1) no, (2) irrelevant, and (3) no.

Why This Case is Interesting

First, who has to pay the $50 million plus? That’s interesting right away.

But from a legal perspective, how much leeway should a stop loss carrier have in assessing decisions by the plan administrator (albeit, actually its claims administrator)?

Also, the interplay between state law claims and ERISA claims among the parties is always interesting given the perils of ERISA preemption. Given the stakes involved, the court will resolve these and other issues with the benefit of briefing by able and knowledgeable counsel.

Note: On the first question posed above, i.e., the leeway of a stop loss carrier, we have this from an earlier ruling noted in the Plaintiff’s Amended Complaint:

The March 28, 2019 ruling states that, for purposes of determining ReliaStar’s
coverage obligations under the stop-loss policy, “the question is not whether ReliaStar would have
reached the same conclusion as the plan administrators[,]” but rather “whether a reasonable person,
given the evidence presented on the administrative record, could have reached the same decision.”
Id. (quoting Computer Aided Design Sys., Inc. v. Safeco Life Ins. Co., 235 F. Supp. 2d 1052, 1061
(S.D. Iowa 2002)) (emphasis added).

Amended Complaint, para. 23, Case 3:18-cv-00965-JAM Document 152 Filed 04/09/20

Supplemental Jurisdiction – Again, taken from the Amended Complaint, the plaintiff’s theory of harmonizing the state law and ERISA claims involves the invocation of supplemental jurisdiction:

This Court has supplemental jurisdiction over Henkel’s state and common law
claims against both ReliaStar and ESI under 28 U.S.C. § 1367 because those claims are so related
to Henkel’s ERISA claim as to form part of the same case or controversy.

Id., para. 32.

Copy of Amended Complaint – Send me an e-mail if you would like to have a copy of the Amended Complaint and I will gladly send it to you. harmon@healthplanlaw.com