Manager of Health Care Network to Pay At Least $14.5 Million to Reimburse Plans for Fees

Wednesday, September 20, 2017
The U.S. Department of Labor and a third-party administrator that provides employee health benefit plans with access to a network of doctors, hospitals and other medical providers have reached an agreement in which the administrator has committed to improve its communications with health plans and to return certain fees the plans paid for claims administration that the department alleged were not fully disclosed to the plans.

The agreement with MagnaCare LLC resolves alleged violations of the Employee Retirement Income Security Act, and was negotiated in 2016. The U.S. District Court for the Southern District of New York approved the agreement on July 14, 2017.

Under the agreement, MagnaCare agrees to return at least $14.5 million in network management fees to ERISA health benefit plans – with possible additional payments of $4.5 million based upon business volume through 2019. The Long Island-based company has also agreed to implement revisions to its disclosures to employee health plans and participants to provide greater transparency on fees and claims procedures. It will also offer to adjudicate certain claims where participants may not have clearly understood the requirements for submitting documentation.

“This case serves as a reminder that a fiduciary must fully disclose fees to plan clients under federal law, as MagnaCare has agreed to do,” said Jonathan Kay, New York regional director for the department’s Employee Benefits Security Administration. “Benefit plans must receive accurate fee disclosures so that they can make informed decisions when selecting service providers.”
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