Health Plan to Repay Clients Over Undisclosed Fees

Under a consent judgment from the U.S. District Court for the District of Minnesota, the Pro Systems Corp. Group Health Plan will restore $203,212 to clients to resolve a lawsuit, Perez v. Pro Systems Corp. et al., filed with the court by the Department of Labor (DOL). The suit alleged violations of the Employee Retirement Income Security Act (ERISA) for failing to disclose to clients that some fees collected for insurance costs were used for purposes unrelated to the health plan. Pro Systems Corp. Group Health Plan provided health care services for clients of Detroit Lakes, Minnesota-based Pro Systems Corp., PRO Resources Corp. and MICROPRO Inc.

An investigation by the DOL’s Employee Benefits Security Administration (EBSA) found that Pro Systems Corp., its chief operating officer (COO), James Piche, and CEO, Michael Brodsho, directed the collection of an “other insurance costs” fee of $80 to $160 per participating employee, from its client companies between January 1, 2006, and December 31, 2011. The companies, Pro Systems, PRO Resources and MICROPRO, retained those fees in their general operating funds (see “DOL Sues Health Plan for Not Disclosing Fees”).

“The law requires that health plan fiduciaries use all monies collected for health plan premiums for the exclusive purpose of providing benefits to plan participants,” says James Purcell, regional director for EBSA in Kansas City, Missouri.

In addition to restoring the funds, the court has prohibited Pro Systems, PRO Resources, MICROPRO, Piche and Brodsho from serving as a fiduciary or service provider to any self-funded ERISA-covered employee benefit plan in the future. An independent fiduciary will be appointed by the court to distribute the settlement amount to the client employers.