Michigan Sugar factory in Sebewaing.

Michigan Sugar files fraud lawsuit against Blue Cross

Michigan Sugar factory in Sebewaing.
Michigan Sugar factory in Sebewaing.

BAY CITY —  Michigan Sugar Co. filed a lawsuit Thursday against Blue Cross Blue Shield of Michigan, claiming the insurance company hid certain fees it was charging while administering employee health benefit plans.

The suit also names Michigan Sugar’s employee welfare benefits plan as a co-plaintiff. It was filed in U.S. District Court for the Eastern District of Michigan in Bay City.

Michigan Sugar claims BCBSM breached fiduciary duty and engaged in prohibited transactions – both under the Employee Retirement Income Security Act of 1974 (ERISA) – by charging and failing to disclose hidden fees and “submitting false and misleading quarterly settlement statements and annual statements” between 1995-2012.

Michigan Sugar, with plants in Caro and Sebewaing and an overall significant presence in the Thumb region, seeks an undisclosed amount in monetary damages.

In an almost identical separate suit, Blue Cross Blue Shield of Michigan was ordered to pay $6 million to Rochester Hills-based Hi-Lex Controls.

Ray Van Driessche, director of community and government relations, Michigan Sugar, said the company wouldn’t comment on pending litigation.

Stephen MacGuidwin, attorney with Grand Rapids-based Michigan Health Lawyers P.L.L.C., filed the lawsuit on behalf of Michigan Sugar and said he wouldn’t comment on pending litigation.

Thomas Bick, chair, insurance coverage specialty team at Detroit-based law firm Butzel Long, recently wrote a blog about the subject in general as a result of legal actions related to the Hi-Lex case and anticipated “tide of lawsuits” like Michigan Sugar’s.

“The hidden fees were allegedly charged by BCBSM in its role as third-party administrator of Hi-Lex’s self-insured health care plan,” Bick wrote. “Under its administrative service contract (ASC) with Hi-Lex, BCBSM charged administrative fees for such services as managing claims, paying health care providers from funds provided by Hi-Lex, and giving Hi-Lex employees, as enrollees in the plan, access to BCBSM’s network of lower-cost health care providers.

Bick explained that “under the hidden-fees arrangement, BCBSM would mark up a hospital bill submitted for payment by an enrollee in the plan, then pay the hospital the originally billed amount and keep the mark-up. Hi-Lex argued that it was unaware that it was paying more than the hospital actually charged.”

Helen Stojic, director of corporate affairs, Blue Cross Blue Shield of Michigan, was reached by The Advertiser early Friday and advised this story would publish today, but did not return a phone call by press time.

In the Hi-Lex case, when the court ruled BCBSM’s hidden-fees scheme was fraudulent under ERISA, BCBSM attorneys appealed the decision.

However, the Sixth Circuit Court of Appeals affirmed the original ruling against BCBSM

“The Court of Appeals agreed…that BCBSM had unlawfully charged its customer, Hi-Lex Controls, “hidden fees” for over a decade,” Bick wrote in his blog. “In October 2014, the U.S. Supreme Court declined to further review of the case, allowing the Court of Appeals’ decision to stand.

Bick wrote that opened the door for other organizations, such as Michigan Sugar, to pursue legal action.

In its complaint against BCBSM, Michigan Sugar alleges the insurance company “was in poor financial shape in 1987. BCBSM started charging new fees and surcharges at the time and “the customer response to the new fees was resoundingly negative,” the complaint claims.

Further, Michigan Sugar’s complaint contends that “in 1993, a simple solution was proposed. Executives suggested replacing the disclosed fees with hidden fees buried in marked-up hospital claims.

“The scheme offered severed advantages to BCBSM, one being the Hidden Fees (per a BSBSM executive summary would be ‘inherent in the system and no longer visible to the customer.’”

The complaint also states that Michigan Sugar and the employee welfare benefits plan “believe that BCBSM charged them Hidden Fees from at least March 1, 1995, through Sept. 30, 2012.”

An answer to the suit filed Thursday had not been filed as of press time.

Andrew Dietderich is editor of The Advertiser and can be reached at andrew@tcadvertiser.com

 

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