Home Care Agencies Sued for Illegal Use of Captive Insurance Company

Executive Summary. Class action attorneys recently filed a first-of-its-kind class action against Edison Home Health Care (“Edison”) and Preferred Home Care of New York (“Preferred”) alleging that the home care agencies used a “captive” insurance company to cheat their home care workers out of millions of Wage Parity Act (“WPA”) dollars. This is the first lawsuit targeting use of captive insurance companies to provide health benefits and was brought under ERISA, the federal statute governing employee benefit plans, as well as the WPA. The suit claims that the agencies used a captive insurer to avoid paying their Medicaid funded home care workers the full $4.09 WPA package of additional wages and benefits (“WPA Package”) and, instead, returned WPA-credited benefit dollars to the agencies and their owners. No prior lawsuit has targeted use of captive insurance companies in this way, and the progress of this lawsuit will be closely watched.