Your Fiduciary Duty Doesn’t Include Flaccid Capitulation

A Clear Pricing Methodology Trumps Provider Demands

A recent federal court ruling just reinforced a core legal principle that underpins reference-based pricing (RBP), even though the case had nothing to do with RBP on its face. In Mejia v. Credence Management Solutions, a judge held that a self-funded health plan was under no obligation to negotiate with out-of-network providers after reimbursing them based on a fixed Medicare-derived methodology.

The plan in question was administered by UnitedHealthcare and paid 110% of Medicare for out-of-network services. That's fairly routine in maximum allowable charge PPO plan language and unremarkable from an out-of-network pricing standpoint. But the legal framework applied by the court is identical to what underpins most RBP strategies, which typically reimburse at 140% to 175% of Medicare and still draw far more ire from hospitals, their apologists, and carrier override-addicted brokers.

The ruling quietly affirms that once a plan adopts a reasonable and consistent reimbursement methodology, fiduciaries may not just be allowed to decline provider negotiation—they may be required to do so in order to protect plan assets and ensure uniformity across participants.

That is, if your plan language is clear and your pricing structure is objectively defensible, engaging in post-claim negotiation may actually expose you to fiduciary risk.

The Facts

Clarisol Mejia was an employee of Credence Management Solutions and a participant in its self-funded ERISA health plan. In 2021, she underwent two non-emergent surgical procedures performed by out-of-network providers. The providers submitted charges totaling $101,046. The plan, administered by UHC, paid $1,606.60 based on its standard out-of-network reimbursement formula: 110% of Medicare, or if no Medicare rate was available, an internal “gap methodology.”

The gap methodology is essentially a fallback pricing formula used when no CMS-published rate exists for a specific service. It often relies on a blend of similar Medicare rates, regional market data, or other third-party benchmarks to approximate a defensible payment amount in the absence of an official Medicare rate. In short: it’s how administrators avoid pulling numbers out of thin air when CMS doesn’t provide one.

Mejia and the providers didn’t like that result. They appealed. They asked UHC to engage in negotiation. UHC declined. Twice. Mejia then sued both the plan sponsor and the administrator, claiming a breach of fiduciary duty under ERISA. Specifically, she alleged they failed to act in her best interest by refusing to negotiate a higher payment amount with the providers.

The defendants filed a motion for judgment on the pleadings, arguing they had no duty—contractual or fiduciary—to negotiate after the fact.

You may very well have a duty not to negotiate.

The Holding

The court agreed that the plan did not require negotiation. The language was unambiguous: if no negotiated (in-network) rate existed, the plan would pay either 110% of Medicare or use its gap methodology. That alone disposed of any contractual duty to negotiate.

But the court went further and addressed the fiduciary question. Did ERISA impose a broader obligation to attempt negotiation—even where the plan didn’t require it?

The answer: no. The judge held that ERISA fiduciary duties are indeed broader than contractual duties—but they do not compel negotiation where doing so would drain plan assets or destabilize the claims process. Instead, a fiduciary must act for the exclusive purpose of providing benefits and preserving plan resources. As the court noted, attempting to negotiate each time a participant asks could interfere with those duties, particularly if the results create inequity or administrative burden.

So while the court denied the motion and allowed the case to proceed (as is typical early in litigation), it drew a clear line: refusing to negotiate under a well-defined, Medicare-based pricing formula is not a breach of fiduciary duty. In fact, negotiation may be inconsistent with the plan’s fiduciary obligations if it invites arbitrariness or jeopardizes assets.

What Was Missing: Patient Protection

This is where Mejia exposes a glaring weakness in traditional PPO-style out-of-network reimbursement models: the patient is left to fend for herself.

After the $101,000 claim was paid at $1,600, Mejia became liable for the remainder—and there was no balance billing defense, no legal support, and no advocacy team standing between her and the provider’s collection agency.

This is a crucial distinction.

Under a well-designed RBP plan, patients are not abandoned. They receive proactive legal defense, advocacy services, and patient education. Most RBP models not only reimburse providers more generously than 110% of Medicare—they also include structured appeal processes and protections that prevent members from being harassed or financially ruined by excessive out-of-network charges.

In Mejia, the math wasn’t the problem. The plan paid exactly what it said it would. But the member had no shield. She was exposed. That doesn’t happen in high-integrity RBP programs because the plan sponsor takes responsibility for defending its pricing—not just administratively, but legally and ethically.

Why This Matters for RBP

This wasn’t an RBP plan. But it might as well have been.

The only difference was the percentage. Most RBP plans pay 140% to 170% of Medicare—not 110%—and apply those rates consistently to all out-of-network claims. That’s more generous, more transparent, and often comes with patient support and legal defense infrastructure.

But the legal backbone is the same: Medicare-derived pricing, spelled out in plan documents, applied without exception.

And that’s what Mejia affirms. The court didn’t care that the provider billed $101,000. It didn’t care that the plan paid 1.5% of charges. It cared whether the plan followed its rules, and whether fiduciaries acted consistently in the interest of the plan as a whole.

That’s a win for RBP.

Because if 110% of Medicare is legally sufficient, and negotiation isn’t required even when payment is this low, then 150% with advocacy, transparency, and a defensible methodology is on even stronger ground.

The Fiduciary Catch

There’s a larger lesson here. Employers often assume that rejecting provider negotiations could be viewed as cold, unfair, or even litigious. They worry it exposes them to ERISA liability or reputational risk.

But the opposite may be true.

Once a plan sets a clear, defensible pricing formula, fiduciaries are obligated to apply it uniformly. Engaging in one-off negotiations can create internal inconsistency, expose the plan to manipulation, and ultimately harm other participants. That’s what ERISA fiduciary law protects against.

In other words: if you don’t stick to the methodology, you may breach your duty.

Final Thought

Mejia didn’t make headlines. It didn’t strike down a network, sanction a hospital, or uncover a billion-dollar fraud. But it did something subtlety important: it further validated what a growing number of employers are doing through reference-based pricing every day—paying claims based on a fair, transparent, Medicare-derived benchmark and declining to be extorted by uncontracted providers and overpriced insurers.

And unlike traditional PPO plans, well-run modern RBP models don’t leave the patient holding the bag. They defend their members and stand behind their pricing.

This case proves you don’t need to negotiate when your plan already defines what “reasonable” looks like. In fact, negotiation may be the wrong move altogether.

Reference-based pricing isn’t just legal. It’s becoming the most fiduciary-sound—and patient-protective—way to pay.