A new wave of health plan litigation could sweep over benefit brokers and advisers who aren't careful about the vendors they recommend to employer clients.
Phia Group chief legal officer Ron Peck has noticed an uptick in lawsuits filed by group health plan sponsors and members against administrators and advisers over failure to enforce cost-recovery strategies like subrogation.
Indeed, a 2025 ERISA litigation review by law firm Willkie Farr & Gallagher LLP noted that "copycat" lawsuits that included failure to recover overpayments and improper claims processing have been filed "at a rapid pace."
Subrogation allows insurers to recover money paid for medical treatment from a third party who caused a plan member's injuries. When those recoveries aren't pursued, Peck says the financial impact often falls back on the plan and its members through higher contributions, raising potential fiduciary concerns for those advising the plan.
"When you look at what it means to be a fiduciary and what standards or duties you're held to, it's really just about transparency, honesty, protecting confidential information, acting prudently in the best interest of your client," Peck said.
Regardless of whether an adviser is actually a fiduciary, his point is that all of these components are best practices that should always be in place to earn an employer's trust and business.
While jumbo employers like Walmart can easily hire sophisticated legal counsel to protect them from ERISA lawsuits, Peck notes that most self-funded plans now involve small and midsized employers that lack those resources and don't have the wherewithal to be fully informed about their benefit plans. Instead, those employers are hiring third-party administrators (TPAs) and brokers to do that for them.
"They're relying on their advice and guidance, and there have been a number of lawsuits already filed against TPAs for fiduciary breach because of how the claims were handled and they've won," he said.
One of those cases was a May 2025 ruling by the U.S. Court of Appeals for the Sixth Circuit in favor of Tiara Yachts Inc. The company sued its TPA, Blue Cross Blue Shield of Michigan, alleging that it overpaid claims, then profited by retaining 30% of recovered funds as fees through a shared savings program.
"What the TPA had done in that particular case is almost secondary to the analysis that the court performed to determine if a third-party administrator can be deemed a fiduciary, regardless of what the contracts say," he explained.
If a plan's right to subrogation isn't being enforced, then in essence he says it's a breach of fiduciary duty because money is being left on the table. According to Peck, these conflicts tend to arise when large vertically integrated insurance carriers known as BUCAs (Blue Cross Blue Shield, UnitedHealthcare, Cigna and Aetna) cross wires with the TPAs they own under an administrative-services-only (ASO) contract for self-insured employer clients.
The best example is the issue of cross-plan "offsetting," which involves recovering a past overpayment. Peck says it represents the clearest path to showing a TPA is acting as a plan fiduciary by controlling plan assets and making decisions that have a direct impact on the plan's financial health.
Under this scenario, the TPA may refer to a contract stipulating that in the event of an overpayment, it will simply underpay next time to reach a break-even point. "The issue is that when I underpay next time, it's somebody else's plan or it's my fully insured business, so you're overpaying some other plan that has nothing to do with you," he cautions. "But I'm checking it off and saying, 'well, the books are balanced.' That demonstrates a complete disregard for the entire self-funded structure – the fact that each plan exists in a separate silo."
On behalf of their employer clients, advisers must ensure payments are made in the correct amount and on time, Peck advised, with the timeliness of payments helping to avoid analysis paralysis for fear of making a mistake. The aim is to have a realistic payment-integrity solution on the front end and robust claims recovery program on the tail end for when there are overpayments, which Peck calls a "belt-and-suspenders approach."
Peck also argues that there should be some level of objectivity or lack of conflict of interest, whether it's working with a third party or determining how the fee is structured. "You want to eliminate any accusation that the overpayment or wrongful payment was intentional or self-serving," he said. "That potential conflict is where the fiduciary issue comes in, even if it's an illusion of self-dealing."
