NEXT ARTICLE
For many years ERISA has been synonymous with retirement - 401(k) plans, fiduciary duty, excessive fees, and more. Today, ERISA is increasingly about healthcare. The same fiduciary principles that govern retirement assets also apply in the context of employer-sponsored health plans, where the financial stakes are just as significant.
This shift reflects a broader evolution; ERISA is no longer only about protecting long-term savings. It is about safeguarding everyday costs that directly affect access to care, prescription drugs, and financial wellbeing.
The Structural Limits With PBM Litigation
The most visible wave of ERISA health plan litigation today centers on pharmacy benefit managers (PBMs). These intermediaries sit between drug manufacturers, insurers, and patients, playing a critical role in pricing and access. Plaintiffs allege that PBMs inflate drug prices and that plan fiduciaries fail to exercise sufficient bargaining power to protect participants from unnecessary costs.
At its core, PBM litigation extends a familiar ERISA principle that fiduciaries must act prudently and in the best interest of participants. Just as they are expected to monitor investment fees in retirement plans, they are now expected to monitor prescription drug costs in health plans.
However, this category of litigation faces structural challenges. Courts have focused heavily on issues like standing and redressability - whether plaintiffs can demonstrate a direct, personal financial harm. Claims have struggled because participants ultimately hit out-of-pocket maximums, shifting the financial burden to insurers rather than individuals.
The result is a paradox. While the underlying fiduciary theory appears strong, proving actionable harm can be complex. This has created space for a different, more contained theory to emerge - one that may be easier to model, measure, and litigate.
When “Choice” Becomes Liability in Health Plan Design
Enter plan dominance, a newer and increasingly compelling theory in ERISA health litigation.
At a high level, the concept is straightforward: when an employer offers multiple health plan options, those options should present meaningful tradeoffs. If one plan is consistently more expensive without offering corresponding benefits, it may be “dominated,” meaning its inclusion in the plan lineup could constitute a breach of fiduciary duty.
The legal argument mirrors established ERISA precedent in the retirement context; fiduciaries should not offer inferior options. If a plan is economically worse under reasonable scenarios, participants should not bear the burden of identifying and avoiding it.
Early litigation in this space suggests this theory is gaining traction. In Barbich v. Northwestern, one of the first cases to reach a dispositive motion stage, the court declined to dismiss the claim outright. Instead, it recognized that whether plan sponsors act as fiduciaries in designing and administering health plans is a fact-intensive inquiry - one that may require discovery.
This is a meaningful development. It indicates that courts are open to examining the substance of plan design decisions.
Additional cases, such as ongoing litigation against the University of Rochester, continue to test the boundaries of this theory. While still early, it is clear that courts are willing to engage, and plaintiffs with well-supported claims may gain access to discovery.
Untangling Plan Complexity Through Multi-Variable Modeling
If plan dominance sounds intuitive, identifying it in practice is anything but simple.
Health plans are extraordinarily complex systems. Premiums, deductibles, co-pays, coinsurance rates, in-network versus out-of-network coverage, prescription drug costs, and coverage tiers (individual, family, etc.) all interact in ways that are difficult (if not impossible) for participants to evaluate comprehensively.
This complexity has historically obscured potential violations. Even when a dominated plan exists, proving it requires more than intuition. It demands rigorous, multi-layered analysis.
At Darrow, this is precisely where technology meets legal insight.
Our approach combines two complementary methodologies:
- Baseline Comparative Modeling
We analyze plan parameters side-by-side, including premiums, deductibles, and cost-sharing structures, to identify initial signals of dominance. - Scenario-Based Simulation
We go further by simulating thousands of “patient journeys,” accounting for real-world variability in healthcare usage. These simulations test whether any plausible scenario exists in which the allegedly dominated plan provides economic value.
When both models align, they highlight cases where participants consistently pay more without benefit.
Crucially, this analysis does not stop at financial modeling. It also requires a deep examination of plan design to ensure that the options being compared are truly equivalent in terms of coverage. Only then can an apples-to-apples comparison reveal whether a fiduciary breach has occurred.
This dual-layered approach combining legal, economic, and computational factors reflects a broader truth that modern ERISA litigation demands tools capable of transforming fragmented data into actionable legal intelligence.
