Federal court approves plan to distribute assets to participants harmed by underfunded group health plan arrangement operating in 36 states
CHICAGO – Health plan participants, employers and medical providers harmed by a multiple employer welfare arrangement, or “MEWA” operating in 36 states will begin to finally receive payments related to more than $54 million in unpaid health claims after a federal court’s action, prompted by litigation and investigation by the U.S. Department of Labor.
Judge John F. Kness of the U.S. District Court for the Northern District of Illinois approved a plan by Receivership Management Inc. of Madison, Tennessee – the MEWA’s court-appointed independent fiduciary – to distribute more than $6.75 million in recovered assets to those who suffered harm.
The court’s approval follows litigation by the department’s Office of the Solicitor and an investigation by the department’s Employee Benefits Security Administration that found fiduciary breaches by AEU Holdings, Black Wolf Consulting and Veritas PEO led to the MEWA’s mismanagement and severe underfunding.
Receivership Management will begin distributing the funds directly to certain participants, employers and medical providers to settle unpaid claims now that a 30-day appeal period has passed since the court’s approval on March 28, 2023.
“The facts of this case are clear: AEU Holdings, Black Wolf Consulting and Veritas PEO mismanaged the plan and left it severely underfunded. The U.S. Department of Labor filed suit to protect participants and beneficiaries from unpaid claims and prevent additional employers, participants and beneficiaries from being bilked out of their healthcare benefits,” said Solicitor of Labor Seema Nanda. “The court’s approval of the distribution plan will bring long-awaited relief to beneficiaries and medical providers with millions in unpaid claims.”
The litigation followed a joint investigation by the department’s Employee Benefits Security Administration in Chicago and Atlanta. At the start of the litigation, the department issued — for the first time — a cease-and-desist order to prevent sub-brokers and aggregators from marketing the MEWA to prospective employers or from enrolling new employers to prevent any further harm.
The department’s Office of the Solicitor has obtained a temporary restraining order, preliminary injunction, consent order, judgments and default judgments against the defendants previously, resulting in $14 million for the outstanding medical claims. In prior orders, the court barred the 16 defendants from serving as fiduciaries or service providers to ERISA-covered plans in the future.
In September 2021, the court appointed an independent fiduciary, Receivership Management Inc. of Madison, Tennessee, which has recovered part of these funds through its court-appointed duties and in litigation. It submitted the distribution plan to the court.
“The violations of the Employee Retirement Income Security Act by AEU Holdings, Black Wolf Consulting and Veritas PEO harmed plan participants and beneficiaries by leaving some of them with unpaid claims,” said Assistant Secretary for Employee Benefits Security Lisa M. Gomez. “The Employee Benefits Security Administration was able to ensure those unpaid claims would not have a lasting effect on participants and beneficiaries. We remain committed to ensuring plan participants and beneficiaries receive the benefits they have earned.”
For information about this case or to view a copy of the independent fiduciary’s plan of distribution, visit the independent fiduciary’s webpage.