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High Court Prepares To Hear ERISA Discretion Arguments

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The U.S. Supreme Court could hear oral arguments concerning a group benefits administration case April 23.

The court has scheduled arguments on the case, Metropolitan Life Insurance Company et al. petitioners vs. Wanda Glenn, for that date.

The court has received briefs about the case from many insurance groups, employer groups and consumer groups, including America’s Health Insurance Plans, Washington; the American Council of Life Insurers, Washington; the National Association of Insurance Commissioners, Kansas City, Mo.; and the American Benefits Council, Washington.

The court also has received a brief from the office of the U.S. Solicitor General and given the representatives from the office, which represents the federal government, permission to speak during oral arguments in support of the respondent in the case, Wanda Glenn.

Glenn worked at a retail store in Ohio for 14 years. In 2000, she filed a claim for group disability benefits with a plan insured and administered by a unit of MetLife Inc., New York. Glenn told the plan she had developed a heart condition.

The plan paid short-term disability benefits, but MetLife later rejected Glenn’s request for long-term disability benefits.

The Social Security Administration awarded Glenn Social Security Disability Insurance benefits.

Glenn sued MetLife in federal court, arguing that it had abused the discretion it had to make benefits determinations under the Employee Retirement Income Security Act of 1974.

The U.S. District Court in Cincinnati declined to overturn MetLife’s decision, but a panel of the 6th U.S. Circuit Court of Appeals reversed the lower-court ruling.

MetLife appealed and asked the Supreme Court to resolve differences between the ways different circuit appeals courts have handled the ERISA discretion issue.

The Supreme Court case now centers around two questions:

1. Whether the 6th Circuit erred in holding, in conflict with 2 other circuits, that the fact that a claim administrator of an ERISA plan also funds the plan benefits, without more, constitutes a “conflict of interest” which must be weighed in a judicial review of the administrator’s benefit determination …?

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.


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