Employees Had No Standing To Sue Health Plan Administrator For High Employee Contributions

CATEGORY: Client Update for Public Agencies
CLIENT TYPE: Public Employers
DATE: Apr 05, 2023

RingCentral, a technology company, sponsored a benefits plan to provide its employees with medical, dental, and vision insurance.  RingCentral participated in a multiple employer welfare plan arrangement called a “Tech Benefits Program,” which pooled assets from multiple employer-sponsored plans into a trust fund to obtain insurance at large-group rates that would have otherwise been unattainable for individual employer plans.  The Tech Benefits Program was administrated by Sequoia Benefits and Insurance Services, LLC (Sequoia), which served as an insurance broker between RingCentral and insurance companies.

Current and former RingCentral employees filed a class action lawsuit against Sequoia under the theory that Sequoia breached its fiduciary duties by (1) receiving and retaining commission payments from insurance companies, which plaintiffs claimed were kickbacks, and (2) negotiating allegedly excessive administrative fees with insurers, which lead to higher commission fees for Sequoia.  Plaintiffs alleged that these acts required plaintiffs to pay higher contributions for their benefits.

The district court dismissed the case for the plaintiff’s lack of standing.  On appeal, the Ninth Circuit Court of Appeals agreed with the district court.  The Ninth Circuit found that plaintiffs failed to demonstrate a concrete injury because there were no facts showing Sequoia’s alleged breach of fiduciary duty (i.e., receiving higher commissions) led to plaintiffs paying higher contributions.  Instead, it was the plaintiffs’ employer RingCentral that had broad discretion to determine how much, if anything, employees were required to contribute.  The Ninth Circuit found that Sequoia’s commissions did not change the plaintiffs’ contribution amounts.

The Ninth Circuit also affirmed the dismissal of the case because the plaintiffs did not identify any judicial relief that could remedy their alleged injury and did not establish that they had an equitable or property interest in the Tech Benefits Program trust.

Winsor v. Sequoia Benefits & Insurance Services, 62 F.4th 517 (9th Cir. 2023).

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