Kraft Heinz Sues Aetna, Raising Novel ERISA Breach of Fiduciary Duty Lawsuit

On June 30, 2023, Kraft Heinz raised a novel ERISA breach of fiduciary duty lawsuit against Aetna, the former third-party administrator for its own group health plan. The case alleges that Aetna improperly managed Kraft’s self-funded plan—which paid out over $1 billion in claims during the relevant time period—in various ways:

1. The Complaint alleges that Aetna “breached its fiduciary duties” by “approving and paying false, fraudulent, and improper claims” and then failing to use its authority as a claims administrator to recoup such overpayments. All of this was allegedly in violation of Aetna’s fiduciary duty to “aggressively investigat[e]” billing fraud using the “latest detection, investigation, and recovery techniques.”
2. Aetna allegedly failed to provide Kraft with medical claims data regarding Kraft’s group health plan, responding to a request for claims information with 178 “cherry picked” claims with limited information. All of this was allegedly done to make it difficult for Kraft to properly review and analyze Aetna’s performance.
3. The lawsuit alleges that Aetna uses “less rigorous claims adjudication standards” for self-funded plan customers, as compared to Aetna’s fully-insured plan customers. The complaint alleges that this was a violation of Aetna’s fiduciary responsibilities of loyalty and prudence to the Kraft group health plan.
4. Finally, the Complaint alleges that Aetna retained millions of dollars in undisclosed fees since the beginning of 2021, and that Aetna engaged in improper “cross-plan offsetting” practices, which allegedly benefited Aetna and its fully insured plan customers at the expense of Kraft’s self-funded Plan.

This suit could well be a harbinger of a new wave of ERISA litigation. The recently passed Consolidated Appropriations Act of 2021 enacted the most significant changes to the regulation of U.S. healthcare since the Affordable Care Act. Among other things, it requires certain third-party administrators (as well as brokers and other health care providers) to provide written disclosures of other compensation they may receive to plan sponsors. It also restricts “gag clauses” that allow third party administrators to withhold data from plan sponsors (among other parties). Lawsuits have recently been filed by union group health plans seeking the disclosure of information from third party administrators, and the Schlichter law firm (which famously raised the initial set of 401(k) “fee” lawsuits) has been seeking participants in several group health plans to raise ERISA claims against the fiduciaries of group health plans.

Another wave of ERISA litigation might be coming.