A federal judge has ruled that Blue Cross Blue Shield of Michigan must face a proposed class action accusing it of profiting from billing mistakes at the expense of the employers whose health plans it administers.
Judge Robert Jonker of the U.S. District Court for the Western District of Michigan denied the insurer’s motion to dismiss July 29, rejecting arguments that the claims were filed too late, that the allegations were too speculative, and that the lead plaintiff had already released its claims.
The lawsuit was filed in June 2025 by Wesco, a chain of gas station convenience stores that hired BCBSM to administer its employee health plan under a contract that ran from 2003 until December 2022. An amended complaint added two more employers, Frankenmuth Bavarian Inn and Opus Packaging Group, as plaintiffs.
Under its “shared savings program,” adopted in 2018, BCBSM keeps up to 30% of the money it says it recovers or prevents from being overpaid on medical claims, describing the program as a payment integrity effort meant to keep providers from collecting more than they are owed.
According to the complaint, BCBSM controls the entire claims process, deciding which claims to pay and how much, and its systems routinely let inflated or improperly coded bills make it through. The insurer then flags those same payments later, blocks or claws back the money, and then takes a cut of the savings. The more errors it allows on the front end, the more it collects on the back end, the complaint alleged.
“In short, BCBSM imposes a fee (paying itself) for correcting mistakes it was obligated to avoid in the first place,” the plaintiffs wrote.
The complaint lists several fees Wesco says it paid under the program – the largest being $22,576 – with each labeled on its statements as payment integrity or administrative compensation.
In its motion to dismiss, BCBSM called the allegations speculative, arguing the complaint does not connect a single processing error to any specific shared savings recovery. The insurer also argued that Wesco had released “any and all claims” when it ended the contract and accepted a final settlement payment of $81,853 in May 2025.
The complaint alleges the program violates ERISA, the federal law governing employee benefit plans, which bans a plan administrator from using its control over plan money to enrich itself. Wesco pointed to a May 2025 ruling from the 6th U.S. Circuit Court of Appeals in a similar case against BCBSM which found the insurer acted as a fiduciary when it set its own shared savings fees and called that kind of self-dealing “presumptively unlawful.”
Wesco is seeking to represent every self-funded plan and employer that paid BCBSM a shared savings fee, a group it says could include hundreds or potentially thousands of plans. It is also asking the court to order the insurer to return all the fees it collected and to pay alleged damages.
A spokesperson for BCBSM said the insurer does not comment on pending litigation.
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