A federal judge has ruled that Blue Cross and Blue Shield of Minnesota must face a lawsuit from the U.S. Labor Department accusing the payer of incorrectly imposing a state provider tax on self-funded health plan customers and violating its fiduciary duties under ERISA.
Since 1994, Minnesota has imposed a tax on the gross revenue of hospitals, surgical centers, and other healthcare providers that comes from payments for providing care to patients. The tax funds MinnesotaCare, a health insurance program for residents with low incomes. In 2024, the provider tax rate is 1.8%.
In the lawsuit, first filed in January, the Labor Department alleges that BCBSM secretly passed the cost of the tax to self-funded employer health plans as part of the negotiated rates it pays to providers. State law does permit the tax obligation to be transferred from providers "to third-party contracts for the purchase of health care services on behalf of a patient, but the provider must specifically request the tax transfer."
"BCBSM has for years unilaterally caused the self-funded health benefit plans for which it serves as third-party administrator to compensate BCBSM in-network providers for amounts they owe under a Minnesota provider tax — amounts the providers never billed or passed on to the plans — without authority to do so under the plans' governing documents," the lawsuit says.
Between 2016 and 2020, BCBSM allegedly collected at least $66.8 million from self-funded plans under the provider tax. The payer currently serves as third-party administrator to 370 self-funded plans in Minnesota.
On Aug. 22, U.S. District Judge John Tunheim ruled that the labor secretary has standing to pursue its claims against BCBSM and denied the payer's motion to dismiss.
"According to the Secretary, BCBSM charged the plans nearly $67 million dollars for MNCare Tax liabilities that the plans did not owe and did not agree to pay," the judge wrote. "That is a concrete injury, caused by BCBSM's billing practices and redressable by a damages award."
"While we cannot comment on specifics of active litigation, Blue Cross and Blue Shield of Minnesota strongly believes the underlying claims in the Department of Labor lawsuit are without merit and based on unsupported interpretations of the MinnesotaCare Provider Tax law," a BCBSM spokesperson previously told Becker's. "Our negotiated payment rates incorporate all applicable taxes and fees and reflect our commitment to ensuring every member has access to affordable, high-quality care. We look forward to actively defending our position throughout the legal process."