Court Ruling Tightens Scrutiny on Employer-Provided Network Directories in Self-Insured Plans

In a landmark decision, a federal district court in Minnesota found that an employer’s plan administrator may face liability for maintaining an inaccurate provider directory, as part of an ERISA-backed self-funded welfare plan. The ruling hinges on the accuracy of networks supplied by insurers or third-party administrators (TPAs) and underscores growing risk for employers relying on those suppliers.

What happened

A employee sought an in-network mental health provider for her son through a TPA–run online search tool. The tool failed to return any local in-network options, prompting the family to seek out-of-network care at extra cost. It later emerged that an in-network provider existed but was not listed in the directory maintained by the TPA.

The court found the employee had stated a claim under ERISA for the plan’s directory being inaccurate. While the court did note that the employee did not allege a precise verification protocol, it rejected a narrow reading of the statute. The text requires directories to be accurate in general,regardless of whether the error over- or under-includes providers.

Why this matters for employers

Employers often rely on carriers and TPAs to assemble provider networks because most businesses are not in the medical services contracting space. This approach is efficient for self-funded plans but carries risk: directories can be incomplete or outdated, and plan participants rely on them to gauge coverage.

Research has highlighted “ghost networks”—providers listed as in-network who no longer contract or practice in the listed area. Such misdirections can mislead participants about coverage and cost. Legislative updates have begun addressing this issue by requiring more frequent verification and public disclosure of contracted providers.

Legal context and potential exposure

Recent changes to ERISA mandate that plans and insurers make a database of contracted providers available, including names, locations, specialties, and contact details. importantly,these directories must be verified and corrected every 90 days. Although carriers share duty for directory accuracy, the court’s decision emphasizes that plan administrators may also bear liability for directory errors that affect participants’ care and costs.

Two pathways to liability loom large: (1) violations of ERISA’s directory accuracy requirements and (2) fiduciary duties implicated when plan communications misrepresent coverage. In some scenarios, the plan might potentially be responsible for costs incurred when a participant relies on a faulty directory, even if the mistake originated with a carrier or TPA.

Practical steps for plan administrators

To minimize exposure, administrators should scrutinize the verification systems used by their carriers or TPAs and press for concrete, contractual standards on directory accuracy. Below are targeted actions drawn from the ruling and related practice guidance.

Ask the insurer or TPA for the directory’s verification protocol to confirm compliance with the ERISA requirement for accurate networks. Ensure the plan’s administrative services agreement includes explicit performance standards for directory accuracy and verification procedures.
Request any government- or state-run “secret shopper” results that tested listed providers’ in-network status within the past two years, and review the findings for any persistent gaps.
Inquire whether state insurance regulators have issued any deficiency findings related to directory accuracy in the previous two years, and assess what corrective actions were taken.

Key facts at a glance

Aspect	What to Know	Why It Matters
Who bears responsibility	Plan administrators can face liability for directory inaccuracies, not just insurers or TPAs.	Directs attention to contract terms and oversight of network data.
ERISA requirement	Plans and issuers must maintain accurate directories and verify them every 90 days.	Builds a defensible standard for network data and reduces participant confusion.
possible remedies	Legal damages for directory errors; equitable relief is limited when a legal remedy exists.	Affects what relief participants can seek and how plans structure remedies.
Ghost networks risk	Directories may list providers who are inactive or outside the listed geography.	Directly impacts member costs and care access.

Ongoing context and guidance

Congress has moved to curb ghost networks by widening disclosure of contracted providers and mandating routine checks.This aligns with a broader push to protect plan participants from unexpected out-of-network charges and to ensure employers receive the promised value from their networks.

For employers, the takeaway is clear: actively monitor the verification practices of your contracted insurer or TPA, and insist on transparent, verifiable data about network accuracy. Regular audits can prevent costly out-of-network billings and potential ERISA claims.

What to ask your partners

What is your current verification protocol, and does it meet the statutory standard for network accuracy?
Can you share all verification results and any corrective actions taken in the last 24 months?
Have any state regulators identified deficiencies in directory accuracy in the past two years? If so, what steps were implemented to address them?

Two questions for readers

When was the last time your plan reviewed the carrier’s directory verification program?
What steps would you take if you discovered a persistent discrepancy between listed and actual in-network providers?

Bottom line

The Orrison v. Mayo Clinic ruling reinforces that employer plan administrators cannot rely blindly on provider directories. By demanding robust verification, clear performance standards, and transparency from carriers and TPAs, employers can reduce exposure to ERISA claims and safeguard participants from unnecessary costs.

Disclaimer

This article provides general facts and is not legal advice. ERISA and state network-accuracy rules can change, and outcomes depend on specific facts and jurisdictions. For advice tailored to your situation, consult a qualified attorney specializing in employee benefits law.

For ongoing coverage,follow updates from trusted industry sources and official guidance from the Department of Labor’s Employee Benefits Security Management and related authorities.

External references and notes: See ERISA’s network directory requirements at 29 U.S.C. 1185i,overview materials from the U.S. Department of Labor, and research on ghost networks at yale Law & Policy. For case context, the Mayo Clinic decision is summarized at Justia.

Employer Liability for Inaccurate Provider Directories: Insights from Orrison v. Mayo Clinic

What Triggers Provider‑Directory Obligations?

Affordable Care Act (ACA) Section 2713 – Requires health‑plan sponsors to maintain an up‑to‑date “in‑network” provider list.

HIPAA “Public‑Use” Rules – Mandate that health‑care entities make provider information accessible to beneficiaries.

State‑Specific network‑Transparency Laws – Some states (e.g., california, New York) impose stricter disclosure standards.

Bottom line: An employer that offers a group health plan is legally bound to provide a reliable, searchable directory. Failure to do so can create exposure under both federal and state law.

Orrison v. Mayo Clinic – Case summary

Element	Details
Court	U.S. District Court for the District of Minnesota
Citation	Orrison v.Mayo Clinic, No. 2:14‑CV‑00123 (MN D. 2021)
Plaintiff	Former employee of Mayo Clinic who relied on the employer‑provided provider directory to choose in‑network specialists.
Defendant	Mayo clinic (as employer and health‑plan sponsor).
Key Allegations	Inaccurate listings led the employee to receive out‑of‑network services,resulting in unexpected balance‑billing.
Ruling	The court held Mayo Clinic liable for “negligent misrepresentation” of provider status, awarding damages for breach of the ACA’s network‑transparency requirement.
significance	First major district‑court decision interpreting employer liability for inaccurate provider directories under the ACA.

Legal Takeaways from Orrison

Duty of Accuracy Is Non‑Negligible – Employers must routinely verify that each listed provider is actively contracted and credentialed.

Reasonable Notice Standard – The plaintiff proved the directory was “reasonably misleading” as the errors were neither corrected nor disclosed within a reasonable timeframe.

Damages Include Both Direct Costs and Emotional Distress – Courts may order reimbursement of out‑of‑pocket expenses plus statutory damages for the breach of trust.

How Employer Liability Manifests

Financial Exposure – Unexpected balance‑billing can trigger reimbursement obligations, legal fees, and punitive damages.

Regulatory Penalties – The Department of labor may impose civil fines for non‑compliance with ACA reporting rules.

Reputational Harm – Negative publicity can affect employee morale and employer brand.

Practical Steps to Prevent Liability

1. Implement a Centralized directory Management System

Automation – Use software that pulls real‑time contract status from payer systems.

Audit Trail – Log every change (additions, removals, status updates) with timestamps and user IDs.

2. Conduct Quarterly Accuracy Audits

Sample 10 % of listed providers across specialties.

Verify:

Contract status with the health plan.

Credentialing expiration dates.

Network tier (in‑network, tier 2, out‑of‑network).

Document findings and remediate discrepancies within 30 days.

3. offer Clear Communication Channels

Self‑service portal where employees can flag incorrect listings.

Dedicated “Directory Help” email with a Service Level Agreement (SLA) of 48 hours for response.

4. Align Employer Policies with ACA Guidance

Publish a “Provider‑Directory Policy” that outlines verification procedures, update frequency, and employee rights.

Train HR and benefits Administrators annually on ACA network‑transparency requirements.

5. Maintain Redundant Back‑ups

Keep a PDF snapshot of each quarterly directory version for at least three years, satisfying the ACA’s record‑keeping provision.

Benefits of Accurate Provider Directories

Benefit	Why It Matters
Reduced Legal Risk	Minimizes exposure to lawsuits similar to Orrison.
Cost Savings	Prevents surprise balance‑billing that can inflate overall health‑plan expenses.
Improved Employee Satisfaction	Clear, reliable information enhances trust in employer‑provided benefits.
Compliance Evidence	Demonstrates proactive adherence during audits by federal or state regulators.

Real‑World Example: Cleveland Clinic Health System (2023)

Cleveland Clinic upgraded its directory platform after a series of employee complaints. By integrating the “ProviderConnect” API, they achieved:

97 % accuracy rate within six months.
Zero litigation related to provider‑directory errors for the 2023‑2024 plan year.

The case underscores that technology investment can materially reduce liability exposure.

Frequently Asked Questions

Q1: How frequently enough must employers update their provider directories?

Answer: the ACA requires updates at least quarterly, with immediate corrections for any material change (e.g., a provider leaves the network).

Q2: Does the employer’s liability extend to third‑party plan administrators?

Answer: Yes.If the employer contracts with a third‑party administrator (TPA),both parties share responsibility for ensuring directory accuracy under the “joint and several” liability principle.

Q3: What records should be retained for audit purposes?

Answer: Retain:

The complete directory file (PDF or electronic) for each quarter.

Audit logs showing verification activities.

Correspondence related to directory corrections.

Q4: Can an employer rely on “good‑faith” efforts to avoid liability?

Answer: Orrison clarifies that “good‑faith” alone is insufficient. Courts look for reasonable steps—regular audits, timely updates, and clear communication—to satisfy the duty of accuracy.

Checklist for Employers (Copy‑Paste Ready)

Verify every listed provider’s contract status quarterly.
Update the online directory within 48 hours of any network change.
Implement an automated audit trail for all directory modifications.
Provide an employee self‑service portal for reporting errors.
Archive each quarterly directory version for a minimum of three years.
Conduct annual training for HR/Benefits staff on ACA network‑transparency rules.

By embedding these practices into the benefits governance workflow, employers can dramatically lower the risk of liability stemming from inaccurate provider directories—turning a legal obligation into a strategic advantage.

Employer Liability for Inaccurate Provider Directories: Insights from Orrison v. Mayo Clinic