DOL wins round in lawsuit against BCBS Minnesota over provider tax
The DOL earlier this year filed a lawsuit accusing Blue Cross and Blue Shield of Minnesota of incorrectly imposing a state provider tax on self-funded health plan customers and violating its fiduciary duties under ERISA.
The U.S. Department of Labor earlier this year filed a lawsuit accusing Blue Cross and Blue Shield of Minnesota of incorrectly imposing a state provider tax on self-funded health plan customers and violating its fiduciary duties under ERISA. Now a district court has denied the organization’s motion to dismiss the case.
“According to the secretary, BCBSM charged the plans nearly $67 million for MNCare tax liabilities that the plans did not owe and did not agree to pay,” U.S. District Judge John Tunheim wrote. “That is a concrete injury, caused by BCBSM’s billing practices and redressable by a damages award.”
Since 1994, Minnesota has imposed a tax on the gross revenue of hospitals, surgical centers and other health care providers that comes from payments and is used to provide care to patients. The tax funds MinnesotaCare, a health insurance program for low-income residents. In 2024, the provider tax rate is 1.8%.
The Labor Department alleged 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 said.
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.
Blue Cross and Blue Shield of Minnesota denied the allegations.
“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 spokesperson previously told Becker’s Payer Issues. “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.”