Lewandowski was on COBRA: why redressability wasn't speculative

Why the court shouldn’t have dismissed Lewandowski v. Johnson & Johnson for being “speculative”: Ann Lewandowski was on COBRA.

One of the reasons the court dismissed Lewandowski’s claim of fiduciary breach by J&J was because the connection between claims and contributions was too speculative.

That may be true for active employees, but not for COBRA continuants on a self-funded plan.

For active employees, the amount an employee contributes is set by the employer using any number of considerations, like ACA affordability, compensation philosophy, and overall financial strength.

But for COBRA, the premium equivalents are tied directly to the cost of claims for a self-funded health plan - by law.

29 U.S.C.S § 1164(1) provides the mechanisms for calculating COBRA premium equivalents.

The authorized methods are:

(A) Actuarial Projection
(B) Past Cost

In the Actuarial Projection method, an actuary predicts the anticipated claims costs based on plan design, past experience, census changes, and any other factors that could affect cost.

In the Past Cost method, the plan looks directly at previous costs for prior plan years and uses that as a basis for setting COBRA premium equivalents.

In both of those methods, paying $1,000 for a drug that costs $90 directly contributes to higher COBRA premium costs because it drives up paid claims.

The court called this a conclusory allegation when the reality is that it is a statutorily required outcome. It’s not merely conclusory, it’s the required consequence of overpaying for claims.

I don’t represent anyone in a case like this, but if I did, I’d be pursuing this avenue.