CHARLOTTE, NC (The Charlotte Observer) - A group of former Atrium Health employees has filed a federal class action lawsuit against the health care company, alleging that the massive hospital chain has cheated thousands of employees over retirement and health benefits by falsely claiming to be an arm of government.
Atrium, formerly Carolinas HealthCare System, is Charlotte’s largest employer. It oversees more than 40 hospitals and employs more than 65,000 people across three states.
But those employees don’t get the same protections that most non-governmental workers receive, the lawsuit maintains. As a result, the suit alleges, many employees are paying too much for their health care and some have missed out on retirement benefits.
The lawsuit was filed Monday by five former Atrium employees “on behalf of all others similarly situated.” If they are successful, it could result in substantial payments to current and former employees.
The federal Employee Retirement Income Security Act, known as ERISA, protects employees in many ways, such as requiring employers to set aside minimum amounts to cover pensions.
But because of an exemption in the law, governmental employees aren’t covered by ERISA. The lawsuit alleges that Atrium has skirted ERISA by incorrectly claiming it is a governmental entity.
“There’s nothing about Carolinas Health or Atrium Health that looks like a governmental entity,” said Karen Handorf, one of the Washington, D.C.-based lawyers representing the former Atrium employees.
Atrium Health did not comment on the allegations but said in a statement it would review the lawsuit and file an answer to the complaint.
Atrium is not a governmental entity, the lawsuit maintains, because it is financially autonomous from government and its governing board is not publicly nominated or elected. In addition, the lawsuit says, no government agency oversees Atrium’s everyday operations.
Atrium’s pension plan is a defined benefit plan, meaning the employer promises a guaranteed retirement benefit to employees. Atrium failed to set aside enough money for that plan to comply with ERISA, the lawsuit maintains.
That led to the plan becoming significantly underfunded, the lawsuit says. The shortfall was $379 million at the end of 2017, according to the lawsuit.
The lawsuit alleges that Atrium’s pension plan does not have insurance to pay benefits if the hospital system is unable to do so. Plans covered by ERISA are required to pay for such insurance through the Pension Benefit Guaranty Corporation.
The lawsuit also contends that Atrium violates federal law by requiring employees to put in five years of service before they are eligible for pension benefits. Those covered by ERISA are eligible within three years.
Several years ago, Atrium - like many employers nationwide - began enrolling new employees in 401(k) plans instead of pension plans. In those plans, the burden for retirement saving falls on employees. The lawsuit contends Atrium’s 401(k) plan does not file reports required by ERISA.
‘Paying more than they should’
Atrium co-owns the company it uses to administer health benefits for its employees, and the lawsuit contends that arrangement has cost employees more for out-of-pocket expenses, such as co-insurance and deductibles.
“With the health care plan, (the employees are) paying more than they should be because the employer is really using the plan to enrich itself,” Handorf said.
Atrium and N.C. Baptist Hospital, in Winston-Salem, jointly own MedCost, a for-profit company that administers health plans and contracts with hospitals and doctors’ offices across the Carolinas to provide medical services.
Some employees at N.C. Baptist filed a lawsuit about a decade ago, alleging that the hospital chose MedCost as its group health plan because the agreement allowed it to be paid inflated amounts for the medical treatment that Baptist provided to its own employees. As a preferred provider organization, or PPO, MedCost is supposed to negotiate on behalf of employee health plans to get discounts for medical services from hospitals and doctors’ offices.
But N.C. Baptist employees contended the hospital selected MedCost, its subsidiary, because it wanted its employees in a PPO that wouldn’t drive a hard bargain on treatment costs employees pay at the hospital.
N.C. Baptist admitted no wrongdoing but agreed in 2009 to settle the suit.
To protect employees, ERISA prohibits most employers from using companies they own to provide health benefits for employees - unless they can show the U.S. Department of Labor that they’re putting employees’ interests first.
The labor department investigated Atrium over its arrangement with MedCost, but closed that investigation in 2016 without taking enforcement action.
But the lawsuit alleges that the Atrium health plan paid “far greater amounts to Atrium for medical services ... than the Plan would pay under other managed care networks, such as Blue Cross Blue Shield of North Carolina.”