Us Airways v. Mccutchen: When Is it Appropriate for a Plan to Take it All?
| Citado como | Vol. 54 No. 2 Pg. 0006 |
| Páginas | 0006 |
| Año de Publicación | 2014 |
Fall, 2013
Francis G. Murphy.
A decision by the United States Supreme Court issued April 16,2013, US Airways v McCutchen, clarified the extent to which a self-insured health insurance plan can recover payments it made on behalf of the insured when the insured person has received payments based on a successful liability claim against a third party.
McCutchen indicates that unambiguous language in a self-funded plan, subject to provisions of federal law under ERISA, may well require full reimbursement of the self-insured plan even if this leaves the beneficiary with no net recovery from his or her personal injury claim. However, if the insurance plan language is ambiguous in certain areas, it may be possible for the injured plaintiff to limit the insurer's recovery under offsetting protections under state and/or federal law.
This article provides practitioners with guidance on this complex issue, starting with a primer on ERISA law and how it applies to self-funded health insurance plans, describes the findings of the McCutchen ruling, and then explores subrogation and reimbursement under New Hampshire law, federal case law on similar subrogation questions, and, finally, at some of the ethical questions lawyers may face with regard to the handling of settlement finds they receive that are subject to recovery by an ERISA self-funded plan. An accompanying checklist for practitioners considering such cases provides a pathway for avoiding traps for the unwary.
I. A PRIMER ON ERISA
The Employee Retirement Income Security Act of 1974[1] , or ERISA, is a federal statute that sets out the regulatory framework that governs many private retirement plans and group health plans.
ERISA does not require any employer to establish a pension plan. It only requires that those who establish plans must meet certain minimum standards. The law generally does not specify the level of benefits the plan must provide. ERISA does the following:
• Requires plans to provide participants with information about the plan including important information about plan features and funding.
• Sets minimum standards for participation, vesting, benefit accrual and funding. The law defines how long a person may be required to work before becoming eligible to participate in a plan, to accumulate benefits, and to have a nonforfeitable right to those benefits.
• Requires accountability of plan fiduciaries. ERISA generally defines a fiduciary as anyone who exercises discretionary authority or control over a plan's management or assets, including anyone who provides investment advice to the plan. Fiduciaries who do not follow the principles of conduct may be held responsible for restoring losses to the plan. Plan fiduciaries include, for example, plan trustees, plan administrators, and members of a plan's investment committee.
• Gives participants the right to sue for benefits and breaches of fiduciary duty.
• Gives plan fiduciaries the right to sue to seek injunctive or "other equitable relief" to enforce provisions of the statute or the terms of the plan.[2]
The U.S. Department of Labor enforces Title I of ERISA, which, in part, establishes participants' rights and fiduciaries' duties. However, certain plans are not covered by the protections of Title I. In general, ERISA does not cover group health plans established or maintained by governmental entities, churches for their employees, or plans which are maintained solely to comply with applicable workers compensation, unemployment, or disability laws. ERISA also does not cover plans maintained outside the United States primarily for the benefit of nonresident aliens or unfunded excess benefit plans.[3]
A group health plan is an "employee welfare benefit plan"[4] established or maintained by an employer or by an employee organization (such as a union), or both, that provides medical care for participants or their dependents directly or through insurance, reimbursement, or otherwise.
Most private sector health plans are covered by ERISA. The level of benefits available under a plan are generally a matter of agreement between an employer and an employee (or the employee's representative).
As discussed in more detail infra, ERISA has a "preemption clause," Section 514, which makes void all state laws to the extent that they "relate to" employer-sponsored health plans.[5]
(This clause states that "the provisions of [ERISA] shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan...."[6] ) The Supreme Court has interpreted the preemption clause very broadly to carry out the congressional objective of national uniformity in rules for employee benefits programs.
State law claims based on denied benefits, such as for consequential damages caused by a denial of a medical procedure, are clearly preempted.[7]
ERISAs preemption provisions contain an exception, the so-called "savings clause"[8] that allows states to continue to regulate "the business of insurance" (authority that Congress gave to the states in the McCarran-Ferguson Act of 1945), as well as banking and securities law[9] Courts have interpreted ERISAs insurance regulation "savings clause" to allow states to regulate traditional insurance carriers conducting traditional insurance business.[10] Under the insurance regulation savings clause, states can regulate the terms and conditions of health insurance; for example, the benefits in an insurance policy[11] But through its so-called "deemer clause,"[12] ERISA prohibits states from regulating plans that "self-insure" by bearing the primary insurance risk, even though by bearing risk they may appear to be acting like insurance companies.[13]
Plans funding coverage through insurance are subject to state insurance regulation (or rather the insurance company providing the benefits remains subject to state regulation), while those that self-insure are "saved" from state oversight. This creates an important distinction between insured and self-insured employer-sponsored health plans. Both types of plans are still ERISA plans, but only insured plans are subject to some types of state oversight.
II. US AIRWAYS V. MCCUTCHEN
A. What the Ruling Said
On April 16,2013, the United States Supreme Court handed down its opinion in US Airways v. McCutchen[14] giving its latest interpretation of ERISAs remedial provision, § 502 (a)(3)[15] for persons insured under an ERISA insurance benefit plan. Its four earlier significant decisions[16] interpreting these remedial provisions raised as many questions as they answered. With McCutchen, however, the Court clarified many issues surrounding a health plan's efforts to recoup funds it paid for healthcare incurred as a result of an injury for which a liability claim has been made against a third party.
A major consideration for a lawyer seeking compensation for an injured client from a responsible party or its insurer is what medical bills have been incurred as a result of the injury. If those bills have been paid by someone other than the client, that payer may seek reimbursement from any recovery obtained from the personal injury claim. Under certain circumstances elaborated below, the plan may be entitled to that reimbursement.
If the medical bills were paid through a plan sponsored by an employer, that plan may be an "employee welfare benefit plan" under ERISA. To qualify for the preferential tax treatments accorded the benefits available to plan beneficiaries, ERISA requires that the plan be established with a written plan document with mandatory provisions and other provisions at the discretion of the plan sponsor (i.e. typically the employer or a union), so long as those provisions do not conflict with the federal statute. The plan document, which has been analogized to a trust document, mandates what can and should be done by plan administrators, fiduciaries, participants and beneficiaries, and defines its assets and its promised benefits.
Two of the permissive provisions commonly found in plans are (1) a subrogation provision allowing the plan administrator to step into the shoes of the beneficiary whose medical bills were paid by or through the plan to pursue a claim against the responsible tortfeasor and recoup the benefits it paid out and (2) a reimbursement provision, allowing the plan administrator to demand reimbursement from the beneficiary of benefits paid out from that recovery. If the plan is established under ERISA, the plan fiduciary, absent voluntary compliance by the participant or beneficiary, may only take steps to enforce the subrogation or reimbursement provision against them through ERISA's remedial provision,! 502(a)(3)[17] .
This article discusses the limitations that may be put on a claim for reimbursement by or on behalf of a plan by ERISA§ 502(a) (3) as interpreted by the courts.
B. SECTION 501(a)(3)
ERISA§ 502(a)(1) and (3) provide:
(a) Persons empowered to bring a civil action
A civil action may be brought—
(1) by a participant or beneficiary—
(A) for the relief provided for in subsection (c) of this section, or
(B) to recover benefits due to him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan;
(2) by a participant, beneficiary, or fiduciary
(A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or
(B) to obtain other appropriate equitable relief (i) to redress such violations or
(ii) to enforce any provisions of this subchapter or the terms of the plan.
The Supreme Court has said that these provisions are part of a "civil enforcement scheme" whose "comprehensive" and "carefully...
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