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News Release

Blue Cross/Blue Shield Of Massachusetts To Refund $10 Million To Health Participants And Employers

Archived News Release — Caution: Information may be out of date.

A U.S. federal judge today ordered Blue Cross/Blue Shield of Massachusetts to repay $10 million to participants in and sponsors of private-sector health plans covered under the Employee Retirement Income Security Act(ERISA).

The court action is the result of a lawsuit filed by the U.S. Department of Labor against Blue Cross/Blue Shield for failing to refund savings to ERISA-covered, self- insured plans for hospital services rendered to residents of Massachusetts between 1988 to 1992. The health care provider also may be required to pay up to $2 million in civil penalties and must notify affected employers of any restitution owed to them under the settlement.

"The department's actions ensure that workers and businesses receive their fair share of state-mandated health care rebates," said Secretary of Labor Alexis M. Herman. "At a time when the Administration is working to increase cost-effective health care coverage, it is unacceptable that any health care provider would reap excessive profits."

Because Massachusetts state law limited the amount hospitals could charge Blue Cross/Blue Shield for services rendered, between 1988 and 1992, Blue Cross/Blue Shield was refunded approximately $180 million from area hospitals on behalf of its customers. The insurer was required to refund a proportionate share of the money to each of the self-insured plans covered by ERISA, but failed to pass along this money.

The lawsuit, filed November 20, 1995, alleged that Blue Cross/Blue Shield improperly benefitted by not refunding the savings and by failing to take steps to reduce the copayments of participants and beneficiaries to reflect the reduced amounts.

This case is part of a nationwide enforcement initiative begun by the department in 1993 to examine plan service providers, such as insurance companies, third-party administrators and health care organizations that provide administrative services to self- insured health benefit plans. The investigative effort is designed to determine whether retention of undisclosed discounts under agreements with medical service providers (i.e., hospitals, physicians, etc.) is a widespread practice by associations that act as third-party administrators. Since 1993, the department has conducted 118 investigations and recovered more than $35 million.

The investigation leading up to the court action against Blue Cross/Blue Shield of Massachusetts was initiated by the department's Boston regional office of the Pension and Welfare Benefits Administration. The settlement was entered in federal district court in Boston.

(Herman v. Blue Cross/Blue Shield of Massachusetts)
Civil Action No. 95-12522PBS

U.S. Department of Labor news releases are accessible on the Internet. The information in this news release will be made available in alternate format upon request (large print, Braille, audio tape or disc) from the Central Office for Assistive Services and Technology. Please specify which news release when placing your request. Call 202.693.7773 or TTY 202.693.7775.

Archived News Release — Caution: Information may be out of date.

Contact Name: Gloria Della
Phone Number:202.219.8921

Employee Benefits Security Administration
January 30, 1998
Release Number
98-35 / BOS 98-026