Blindsided 2.0 - The First Supplemental Health Plan Lawsuits and What They Reveal About Fiduciary Risk

Executive Summary: The Predicted Fiduciary Risk Has Become Real Litigation

The original Blindsided -- Are Supplemental Health Plans the Next Class Action Risk for Plan Sponsors, published in June 2025, foreshadowed the risk to employers and the potential for ERISA fiduciary litigation.

In December 2025, Schlichter Bogard – the same firm that led the multibillion-dollar wave of 401(k) fee litigation - brought that fear to fruition by filing four supplemental health plan class-action lawsuits on the same day. The campaign spread beyond a single firm when additional class-action lawsuits were filed by Keller Rohrback in April and Bailey Glasser in July of 2026. These lawsuits confirm what many employers suspected but had not yet faced: voluntary, employee paid supplemental health plans are no longer operating beneath the litigation radar.

These early lawsuits demonstrate three critical realities:

Plaintiffs are not attacking benefit design – they are attacking the fiduciary responsibility aspect
Opaque compensation and broker conflicts sit at the center of the allegations
Recent Supreme Court precedent has made early dismissal less likely, shifting leverage decisively toward plaintiffs

In this environment, employers are judged less on outcomes than on whether they exercised independent, transparent, and ongoing fiduciary oversight.

1 | From Prediction to Proof: Supplemental Health Plan Lawsuits Have Begun

For years, supplemental health plans benefited from relative obscurity. Many benefit leaders paid little to no attention to these offerings due to their ease and low friction, made effortless by the industry. Oversight was informal, the compensation structures were opaque, and fiduciary discipline lagged behind retirement plans. That era has ended.

The recent class-action lawsuits confirm that plaintiffs’ firms now view supplemental health plans as lower resistance, higher margin targets than traditional 401(k) lawsuits. These plans typically involve employee pay-all premiums, excessive compensation, low loss ratios and inadequate disclosure - characteristics that can support both breach of fiduciary duty and prohibited transaction claims under ERISA. The complaints uncover years of scant oversight and put concrete numbers on the table – plaintiffs allege broker commissions as high as 60% of premium, against the industry norm they characterize as being closer to 5–6%.

The core lesson of the opening lawsuits is simple: fiduciary inattention is risky.

2 | What the First ERISA Fiduciary Breach Lawsuits Are Really About

Despite media framing, the lawsuits are not challenging whether supplemental health benefits should exist. These benefits have grown significantly in popularity and value because they play an important role in helping employees protect their financial well-being, especially with high-deductible medical plans. What the lawsuits are challenging is whether employers fulfilled their fiduciary duty and exercised adequate oversight in offering and managing these benefits.

Andrew Schlichter, who is leading Schlichter Bogard’s supplemental health plan lawsuits, frames the litigation in terms employers will recognize from the 401(k) era: “We wanted to and continue to want to provide a check on employers and other fiduciaries who aren’t doing their best for employees. If you’re a fiduciary, you ought to do what’s in the best interests of your participants, period.” He attributes the alleged pricing problem to the funding structure itself “Because employers aren’t on the hook – they’re not paying any part of the voluntary benefits insurance – in a lot of plans, employers are allowing very, very, very expensive supplemental insurance.” That framing is the heart of the plaintiffs’ theory – not that the products are inappropriate, but that the absence of employer scrutiny has produced an oversight vacuum that ERISA does not tolerate.

The allegations center on:

Failure to monitor party in interest compensation
Undisclosed or excessive broker commissions
Conflicted intermediaries influencing carrier or service-provider selection
Lack of documented reasonableness analysis
Absence of ongoing fiduciary review

Courts are focusing not on intent, but on whether employers had access to and reviewed the information necessary to act prudently.

3 | The 401(k) Litigation Playbook, Reused for Supplemental Health Plan Fiduciary Risk

The supplemental health plan litigation follows a familiar path: identify hidden compensation, survive dismissal, force discovery, and apply settlement pressure.

What makes supplemental health plans uniquely vulnerable is:

Margins are significantly higher
Disclosure regimes are weaker
Fiduciary documentation is thinner
Oversight is often informally delegated to conflicted non-fiduciary parties

The leverage is shifting toward plaintiffs. The Supreme Court precedent, including Cunningham v. Cornell, potentially lowers the bar for plaintiffs to proceed past dismissal. In addition, plaintiffs are now requesting jury trials.

4 | What Plaintiffs Have Already Learned About Broker Compensation Conflicts

The complaints reflect a sophisticated understanding of the voluntary benefits ecosystem. Plaintiffs are examining:

Commission stacking and re-heaping practices
Carrier embedded bonuses and overrides
“Pay to play” broker arrangements
Loss ratios well below market norms

The complaints also focus on multi-year plan histories, not merely current pricing – underscoring that fiduciary duty is ongoing, not one-and-done.

5 | Why Inaction Is Now an Affirmative Fiduciary Risk Decision

Post Cunningham, employers can no longer rely on early dismissal to control risk. Discovery costs, reputational narratives, and internal disruption accrue quickly.

Boards and executives now face a governance question:

What steps were taken once fiduciary risk was known?
Inaction is no longer passive – it is a decision that carries risk.

6 | What a Defensible Fiduciary Oversight Model Looks Like Now

The three structural elements of a defensible fiduciary model:

Independence

Fiduciary oversight must be structurally independent of carrier and commission economics. Reliance on intermediaries paid by the carriers they recommend introduces conflict that courts increasingly view as incompatible with fiduciary duty.

True independence requires conflict removal, elimination of perceived internal bias, and separation of the plan sponsor’s fiduciary decisions from the economic interests of any single carrier, broker, or service provider.

Achieving financial independence empowers fiduciaries to make clear decisions based on participant value and documented reasonableness.

Transparency

Fiduciary oversight requires complete transparency over total compensation – commissions, overrides, bonuses and true loss ratio economics. Vague assurances provided by conflicted intermediaries are no substitute for full documented visibility.

Ongoing Monitoring

Fiduciary oversight relying on one-time audits is no longer sufficient. Compensation structures evolve, carriers renegotiate, and conflicts reemerge. An ongoing monitoring solution ensures employers have the discernibility to achieve ongoing structural alignment.

Every employer needs a defensible fiduciary posture to reduce exposure and litigation pressure.

7 | Next Steps for Every Employer to Reduce Fiduciary Risk

To reduce risk, employers must take proactive steps to establish and maintain a defensible fiduciary posture by documenting structural independence, complete transparency, and ongoing monitoring. There are many supplemental health plan models in the industry, not all are defensible.

The Employees First Model ensures benefit leaders establish and maintain a defensible fiduciary posture to reduce exposure and litigation pressure while also:

uncovering significant savings, adding value to their total rewards package
simplifying their fiduciary due-diligence and decision making
removing conflicts they did not know they had
receive ongoing monitoring through unbiased third-party assessments
reduce risk and maintain control of the narrative

Benefit leaders can swiftly achieve this fiduciary gold standard with no additional expense, no added time constraint, and without shifting their focus from core plans. Employees First makes it easy for them to get what they need while also enhancing benefits value for their organization and their employees.

A fiduciary standard you can defend, layered over the program you already have. Take the next step today to avoid risk while adding value to your current program: www.myemployeesfirst.com/contact.

Conclusion: The Supplemental Health Plan Lawsuit Wave Is Here

The concerns raised in the June 2025 edition of Blindsided -- Are Supplemental Health Plans the Next Class Action Risk for Plan Sponsors have come to fruition. The initial class-action filings in December 2025 are being amplified by a second wave of lawsuits unfolding in 2026.

The best way to mitigate risk is to take a proactive approach. These early class-action filings closely mirror the patterns we saw when litigation started to come out around 401(k) plans. In hindsight, we learned, those who moved first, fared best because they retained control over timing, remediation, and the narrative. The courts are not challenging the intent behind these plans, they are asking if you reviewed the information necessary to act prudently. Inaction has consequences.

About the Authors

Heath Miller
Lawyer, Entrepreneur & Co-Founder of Access Retirement Solutions

Heath Miller is an ERISA attorney with extensive experience across multiple aspects of employment law, ERISA, 401K, Retirement, Defined Benefit, Non-qualified Plans and Equity Compensation and more. His expertise is particularly noted in Tax and Employee Benefits Law with a specialty in ERISA issues associated with retirement and deferred compensation arrangements. His contributions as Co-Founder of Access Retirement Solutions have been pivotal in addressing the concerns of employers regarding retirement plans, ensuring transparency and low-cost solutions for all.

Amy Hollis

Founder and CEO of Employees First

Amy Hollis is the founder and CEO of Employees First, a women-owned benefits firm that provides in-depth analysis of employer supplemental health plan offerings. The firm pioneered the “Benefits-Captive-as-a-Service” model which helps employers achieve the independence, transparency and ongoing monitoring goals associated with fiduciary best practices. Over the last 20+ years, Amy has led two of the three largest supplemental benefit practices in the industry and brings that deep experience to the intersection of employee benefits, ERISA compliance, and fiduciary strategy. Under her leadership, Employees First delivers proprietary audit solutions and Tier 1 legal-backed models that help employers reform their supplemental health plan offerings to return value to employees and avoid legal landmines.