Barbich v. Northwestern University

A federal court just let an ERISA case move forward that health plan sponsors should not ignore.

In Barbich v. Northwestern University (N.D. Ill.), the judge refused to dismiss breach of fiduciary duty claims tied to what plaintiffs called a “dominated” PPO option.

Plaintiffs allege Northwestern offered a Premier PPO that cost more at every level of utilization without commensurate benefits versus another PPO tier, leaving no plausible utilization scenario where a participant would be better off choosing it.

For 20 years, 401(k) sponsors have faced suits for keeping higher-cost investments on the menu when identical lower-cost options were available. Barbich applies that same theory to health plan design.

The court did not resolve the settlor doctrine defense at the motion-to-dismiss stage. Northwestern can still raise it, but only after getting through discovery first.

This is one district court decision. It’s not binding precedent. But plan sponsors who already stress-test their investment lineups should be asking whether their medical option menus deserve the same scrutiny.

If you sponsor both a 401(k) and a health plan, are you reviewing your plan ‘menus’ with the same governance lens?