High Court Prepares To Hear ERISA Discretion Arguments

2. If an administrator that both determines and pays claims under an ERISA plan is deemed to be operating under a conflict of interest, how should that conflict be taken into account on judicial review of a discretionary benefit determination?

MetLife has contended in court filings that ERISA specifically permits an insurer to insure and administer the same ERISA plan.

Requiring employers to hire separate insurers and benefits administrators to avoid conflict-of-interest allegations could increase plan costs, MetLife says.

AHIP and the American Benefits Council argue in a joint brief that group benefit plan administrators need discretion to hold down plan costs, and that the marketplace is the best guard against group benefit plan insurer-administrators from abusing their discretion.

“If insurers do not administer employee benefit plans to the actual benefit of employees, employers will simply retain other insurers to insure and administer the benefits,” AHIP and the benefits council write.

The ACLI says discretion, and judicial deference for that discretion, can help plans cope with the wide range of issues that confront claims administrators.

Discretion and a deferential standard of review “reduce the danger that the outcome will be strongly influenced by unusual facts that may be present in a particular case,” the ACLI writes in its brief. “Accordingly, in the absence of an actual conflict of interest and where the states are already well-empowered to address and remedy inappropriate claims administration, the marginal benefits of de novo or ‘sliding scale’ review to the average employer are minimal, at best. The traditional deferential approach is the most appropriate approach.”

Gail Sciacchetano, an NAIC lawyer, and John Morrison, the Montana insurance commissioner, writes in a brief submitted on behalf of the NAIC that the concept of giving group insurers discretion over the plans they insure is flawed.

“To the extent that the term ‘administrator’ implies a disinterested third party that is capable of objectively evaluating the merits of a claim, the whole concept of a dual-role administrator is an oxymoron,” Morrison writes. “Insurers are not merely administrators, and it is not realistic to expect them to be disinterested; it is not fair to the insurers to demand that they be disinterested.”

The lawyers who submitted the Solicitor General’s brief point to what they say are problems with the way MetLife made its decision on Glenn’s claim.

Glenn’s doctor repeatedly said she was incapable of working, and MetLife placed undue emphasis on the fact that the doctor checked a box indicating that Glenn could work on a 2-page form, according to the Solicitor General’s brief.

Because of this concern and others, “the court of appeals had ample basis on the record before it to conclude that MetLife’s denial of benefits was outside the range of reasonableness,” officials write in the brief.