Employees sue medical giant over excessive healthcare costs

CHICAGO (CN) — A group of Abbott Laboratories employees filed a class action over the steep costs they incurred participating in the medical device company’s health insurance plans.

The group of employees claim in the class action filed Tuesday in Illinois federal court that Abbott offered its employees two health insurance options that provided the same medical coverage for different costs.

“Defendant knew, or should have known, that participants who chose the more expensive option (i.e., the Traditional PPO) would virtually always pay more for the same covered medical treatment — yet defendant continued to offer that more expensive health insurance option to plan participants for years,” the employees wrote in their 44-page complaint.

The employees filed the class action under the Employee Retirement Income Security Act, which was enacted in 1974 to address public concern about the abuse and mismanagement of private pension plans funds. The federal law sets the minimum standards for most retirement and health plans to provide protection for participants.

The act is primarily regulated by the Department of Labor, which has promulgated guidance that a company’s selection of its employees’ health insurance plans must be an objective process. The Department of Labor also requires a company’s process in selecting an insurance plan to “avoid self-dealing, conflicts of interest or other improper influence.”

The Abbott employees note in the complaint that the duty of prudence and objectivity is not met by merely offering a menu of options if some of those options are predictably worse for participants. They accuse Abbott of failing to meet that duty by offering employees two differently priced health insurance plans with the same access to medical care and services. At every level, employees were spending more to participate in the traditional preferred provider organization option.

“The HIP PPO is consistently cheaper than the traditional PPO,” the class wrote in a footnote of the complaint. “Although a computer simulation may run thousands of scenarios and find very unlikely circumstances in which the traditional PPO results in lower participant costs, they do not change the conclusion that the traditional PPO virtually always imposed substantially greater costs on participants while providing the same covered medical benefits.”

A representative from Abbott Laboratories did not respond to multiple requests for comment. Headquartered in Abbott Park, Illinois, the healthcare company was ranked 107th on the Fortune 500 this year with $44.3 billion in revenue.

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