Navarro v. Wells Fargo, 2025 WL 897717 (D. Minn. 2025)
Available at https://www.govinfo.gov/content/pkg/USCOURTS-mnd-0_24-cv-03043/pdf/USCOURTS-mnd-0_24-cv-03043-0.pdf
A group of former participants in a self-insured employer sponsored health plan sued the employer/plan sponsor, asserting that it breached its fiduciary duty under ERISA by mismanaging the plan’s prescription drug benefits, causing participants to pay substantially more in participant contributions and out-of-pocket costs than they otherwise would have. The court dismissed the case, concluding that the participants lacked standing (that is, they did not have the right to bring the lawsuit) because they had not shown that they had experienced a “concrete and particularized” injury that could be remedied by a favorable outcome in court.
The participants presented examples of wide disparities between the plan’s prices for certain prescription drugs and the (much lower) prices pharmacies charged uninsured individuals for those same drugs. They argued that these costs, along with high administrative expenses paid to the plan’s pharmacy benefits manager (PBM), directly affected their out-of-pocket costs and the amount they were required to pay in participant contributions because those contributions were generally determined with reference to plan costs. But the court found these arguments speculative and unconvincing, noting that the disparate drug prices related only to a small subset of drugs covered by the plan and that the employer had sole discretion to set contribution rates, meaning there was no guarantee that lower plan costs would have resulted in lower participant contributions. In addition, the court explained that these individuals would not benefit from any potential equitable relief the court could grant, such as replacing the plan’s PBM, because they were all former participants. Due to the lack of concrete injury or stake in the outcome of the case, the court dismissed the participants’ claims.
EBIA Comment: The court noted that, while the law compelled this outcome, it was sympathetic to the participants’ concerns. These lawsuits, which echo retirement plan lawsuits over plan fees and costs, are becoming increasingly common. While health plan participants have generally been unsuccessful so far, lawyers representing them are likely fine-tuning their arguments based on rulings like this one. Plan fiduciaries will be better able to defend against these claims if they can show that they reviewed available market options, compared fees and costs, and negotiated favorable terms with service providers and networks. For more information, see EBIA’s ERISA Compliance manual at Sections XXVIII.B.6 (“Pharmacy Benefit Managers (PBMs)”) and XXVIII.C (“Fiduciary Responsibilities Imposed by ERISA”) and EBIA’s Self-Insured Health Plans manual at Section XXIII.A (“Selecting Service Providers”).
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