13 December 2018Analysis

Home care agencies Edison and Preferred accused of using captive to cheat workers

A New York lawsuit has accused home care agencies Edison Home Health Care and Preferred Home Care oh New York of using a captive insurance company Healthcap Assurance to cheat their workers out of millions of Wage Parity Act (WPA) dollars, which would be paid in wages or employee benefits.

According to HR law firm FordHarrison, this is the first lawsuit targeting use of captives to provide health benefits and was brought under The Employee Retirement Income Security Act (ERISA), the federal statute governing employee benefit plans, as well as the WPA.

Defendant in the suit include Edison and owner Samuel Weiss, Preferred and its owner Berry Weiss, along with the captive Healthcap Assurance, and 15 unnamed individuals that are fiduciaries accused of breaching their fiduciary responsibilities and benefitted from prohibited transactions.

The suit was filed by current and former aides employed by Edison and Preferred in the US District Court for the Eastern District of New York.

Plaintiffs alleged that the agencies had used a captive to avoid paying their Medicaid funded home care workers the full $4.09 WPA package of additional wages and benefits  - in what is referred to as a WPA Package - and, instead, returned WPA-credited benefit dollars to the agencies and their owners.

Allegedly, the health plan held around $35.5 million in WPA-credited benefits which were meant to pay health insurance benefits for 4,000 workers. However, it is said that less than $10 million in health benefit was paid out from 2015 to 2017, at an administrative cost of $.50 per hour, and returned the remaining dollars as “surplus” or other direct or indirect financial benefit to the agencies and their owners.

FordHarrison suggested that the focus of this suit is on the return of this purported “surplus”, as WPA prohibits any “refund” or “dividend” to an agency of monies contributed toward the WPA Package, and an agency must guarantee that the WPA credit taken is not more than the amount of the contribution actually used for benefits.

Transfer or use of benefit plan assets to or by a part in interest - for example fiduciaries, employers, directors, officers, or employees, including affiliates and relatives - is prohibited under ERISA, as are acts by fiduciaries that result in such assets being used for their own benefit, or the benefit of others in whom they have an interest.

FordHarrison added that the progress of this lawsuit will be watched closely.