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You are here: Home / Anderson On Health Insurance / ERISA and Domination

ERISA and Domination

by | 15 Comments

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I am not a lawyer, but this lawsuit in Illinois is fascinating:

A rapidly growing line of ERISA cases seeks to impose fiduciary standards of conduct—developed by courts largely in the retirement plan context—to health plan design choices.  The most recent, Barbich et al. v. Northwestern University et al., No. 1:25-cv-06849 (N.D. Ill.) filed on June 20, 2025, involves a new and potentially disruptive twist: plaintiffs allege that the university violated ERISA fiduciary duties by offering an allegedly imprudent health plan option…

laintiffs claim that Northwestern University improperly included a higher-premium, lower-deductible PPO alongside a lower-premium, higher-deductible PPO, arguing that the higher-premium option provided no meaningful financial advantage for participants.

I have a few publications on choice domination in the ACA marketplaces, and there is a rich literature on dominated choice in the employer sponsored insurance space.  Dominated choices occur when on all relevant factors of decision making, Plan A is never worse than Plan B and on some of those factors, Plan A is better.  My work in the ACA showed that avoiding dominated choices in the ACA markets during the era of enhanced subsidies would lead to substantial savings:

5.8% of 748 087 California marketplace enrollees currently default to dominated health care plans with higher premiums and cost sharing; more than 98.0% of enrollees have low incomes. By comparison, an alternative smart default system would default many enrollees to more generous plans with approximately $100 lower monthly premiums and almost $2000 lower deductibles.

These types of choice errors are expensive.  CMS under the Biden administration improved defaults for low income enrollees in 2024 and 2025.  The recently passed Republican reconciliation bill forbids keeping people out of bad plan choices.

Now this lawsuit is pushing the argument that employers have to avoid offering dominated plans.  I am again NOT A LAWYER, but I think this is a reasonable argument to make as the employers are acting as an agent for the employees and offering obviously bad things is probably a bad thing.

 

Reader Interactions

15Comments

  1. 1.

    Anonymous At Work

    At trial/in briefing, the question might turn on what a reasonable college HR administrator would know about Choice Domination as part of their duty of due diligence (the standard of care for fiduciaries generally).  Someone who reads your research, and your type of research generally, might know and avoid dominated plans, but a court might not think that that level of expertise is obtainable by due diligence from the average college HR rep.

    However, holding HR administrators that pick PPO plans to a higher standard than the average person-on-the-street is a pretty good theory to use.  Also, Illinois holds the University of Chicago and I wonder what those “Homo Economius” law-and-economics professors think (well, the honest ones).

  2. 2.

    BigG

    Many years ago, the university I worked at did the same thing: high premium- low deductible plan where the extra amount you paid in premiums was more than the deductible difference. I got suspicious looking at this, and had to create a spreadsheet of insurance cost vs. health spending to work this out for myself. I convinced my wife to switch from this plan, but I the. Discovered that all the graduate students were defaulted into this plan, I.e. a bunch of twenty year old who were unsophisticated buyers and highly unlikely to even access their deductible between 21 and 25 years old. Absolutely evil.

  3. 3.

    BigG

    @Anonymous At Work: I think a reasonably numerate person who is paying attention to costs could see this and be suspicious enough to check and work this out (see my post just below). Anyone whose job is to work with the insurance plans would surely know.

  4. 4.

    Anonymous At Work

    @BigG: I agree personally, but whether this is part of fiduciary duties, to possess or obtain this level of expertise, is not what I know well-enough to categorize as a “slam-dunk”.  Additionally, whether and the degree to which plans are “dominated” might become genuine questions of material fact, i.e. questions for juries to resolve.

  5. 5.

    p.a.

    Didn’t drumpf etc weaken fiduciary requirements in financial advising?  “We don’t want to limit consumer choice.”🤢  If the stuck pig insurers, providers and/or employers, squeal, there’ll be a work-around.  Or fuck-around…

  6. 6.

    Chris S. Sherbak

    I thought this was the classic choice: choose high prem/low deduct if you expect to use the insurance and are worried about dealing with the deductible OR low/high when you’re confident you won’t likely use it much at all? Or was the diff (as noted from another poster) was egregiously high and therefore not even cost effective. Seems like you shouldn’t even OFFER plans where the diff in the deductible ISN’T the same as the annual diff in the premiums? Or was that the point of the lawsuit? (I actually have friends who might be covered by this – be good to ask them their perspective.)

  7. 7.

    Anonymous at Work

    @p.a.: ERISA imposes fiduciary standard for college plans.  Spanky did nuke the rules for investment advisors to abide by fiduciary standards separately.

  8. 8.

    Gloria DryGarden

    I’ll read up on this later, but just the words

    choice domination

    opens a field of ideas and sharp pointy word ideas. If I wake up, maybe it’ll become poems. Or free writing. Often an interesting way to explore.

    I like choice. Domination is a separate topic. More later,

    blessings,

    gloria

  9. 9.

    lowtechcyclist

    ERISA? Boy howdy, it’s been forever since I’ve seen that acronym. IIRC, it was mostly about pension plans, from when employers still offered those, before they shifted to 401(k) plans.

    But if its fiduciary standards can be applied to employers’ offerings of health care plans, now that pension plans are pretty much history, that would be a Good Thing.

  10. 10.

    lowtechcyclist

    @Gloria DryGarden: ​

    I like choice. Domination is a separate topic. More later

    Certain meanings of ‘domination’ should certainly be saved for Balloon Juice After Dark! But the term is used in a similar way in certain areas of combinatorics* to how David’s been using it here for the past several years with respect to health plan choices, so I knew from the get-go that he wasn’t getting kinky on us.

    *I’m thinking partially ordered sets, but I could be wrong. It’s been a looooong time since I was last doing combinatorics!

  11. 11.

    Gloria DryGarden

    @lowtechcyclist: ooh a new word. I’ll look it up. Or call my math degree guy, Pollyanna.

    I know he’s not getting kinky, it just opened a can of worms for me, a whole field of nuance and angles about society, subjugation, who dominates whom, in personal and work and community relations. And politics. Pettiness, and sweeping masses of humans under the rug, or under the bus. Erasure. So many variations.

    And what alternatives there are to dominance and competition. which I’d like to water and grow. Women my age, we’ve experienced domination for decades, subtle and overt, gone head to head w it.

    Really I could free write an essay… without touching (ahem) on the after dark meanings. Save those for a respite thread.

    and I get that my stream of thinking here is a divergence from David’s topic. My thoughts are dominated by the personal-  changes to my sleep cycle, and the many tasks assigned for today, etc.

  13. 13.

    Shana

    FYI it stands for Employee Retirement Income Security Act, so not necessarily pension plans (which hardly exist anymore). My husband is a retired employee benefits lawyer and younger daughter is now working is the same area.

  14. 14.

    BradF

    @David Anderson:

    If 10-20% of enrollees would benefit from plan A, and 80-90% of enrollees would benefit from plan B, can you make a case on the merits? HR or the TSAs are not serving their customers well by not offering guidance on optimal choice, but I dont see this as a cut and dry action.

Comments are closed.