What the Horizon $100M Settlement can Teach us about Due Diligence, Oversight, and Fiduciary Responsibility

What the Horizon $100M Settlement can Teach us about Due Diligence, Oversight, and Fiduciary Responsibility

Every so often, something happens in the benefits world that serves as a loud wake-up call for employers. The recent $100 million settlement between Horizon Blue Cross Blue Shield of New Jersey and the NJ Attorney General is exactly that.

On the surface, it looks like a standard dispute between a carrier and a state contract. In fact, Horizon has since released a statement claiming exactly that. Despite the reason for the suit, plan sponsors should be mindful of the allegations and the consequences of not doing their due diligence by monitoring their plans.

So, what actually happened with Horizon?

At the center of the case is one specific contract requirement: the “lesser-of” clause. The State’s plan contract said Horizon must pay providers the lesser of:

• the amount the provider billed, or

• the negotiated rate Horizon had already established with that provider.

The State alleged that Horizon:

• Knew early on that this clause would be hard (or impossible) for them to operationalize

• Bid on the contract anyway

• Paid claims that exceeded both the billed amount and the negotiated rate

• Submitted inaccurate claims and EOB information

• Processed millions in overpayments without flagging them

But the more interesting question is: How was this even discovered?

It was found because:

• The State initiated a contract compliance review

• A whistleblower filed a False Claims Act complaint

• Auditors identified outlier claims that didn’t match the contract

• Data inconsistencies became too significant to ignore

Under ERISA, plan sponsors are responsible for ensuring the plan is operating in the best interests of its beneficiaries. On way to ensure they are satisfying their fiduciary obligations is to have processes in place for monitoring vendors, reviewing contracts, and documenting what they do.

You can’t assume your carrier or TPA is catching everything, and regulators won’t accept “I didn’t know” as a defense.

Why employers should care

Even if your plan is much smaller, the risk is the same:

• Misapplied contract terms

• Overpayment of claims

• Hidden fees

• Inaccurate EOBs

• Lack of transparency

• Billing errors

• Administrative misunderstandings

Fiduciary duties aren’t optional

As a plan sponsor, you’re expected to:

• Act prudently and in the best interest of plan participants

• Monitor your service providers

• Understand your contracts

• Review fees and payments

• Ensure claims are administered correctly

• Keep documentation of every decision you make

Key point:

Your carrier or TPA is not the fiduciary.

You are.

That means you must be able to show that you’re overseeing your health plan properly.

This is where documentation becomes your greatest protection. At Innovative Benefit Planning, we tell employers this constantly: If it’s not documented, it didn’t happen.

You may be reviewing claims, meeting with vendors, asking questions, monitoring reports; however, unless there is a written record, it’s as if none of it occurred.

That’s why we created resources specifically for this:

Document Your Due Diligence: Do You Know Your Fiduciary Duties Under The Consolidated Appropriations Act?

Get a CAA Checklist: CAA Medical Fiduciary Checklist - Innovative Benefit Planning

This tool walks you through exactly how to:

• Capture meeting notes

• Store vendor reviews

• Track fiduciary decisions

• Document claim concerns

• Create audit-ready files

• Build a defensible oversight process