The risk retention group industry is hailing a seminal Supreme Court ruling Tuesday which held that self-insured group health plans are entitled to enforce the terms of their plans as written.
The court ruled unanimously in US Airways Inc. v. McCutchen that common principles of fairness and equity can’t overrule specific contract language written by sponsors of a self-insured health plan.
However, four justices dissented on some procedural issues not central to the key issues in the case, said Bryan Davenport, an Indianapolis lawyer and specialist on subrogation issues, as well as a member of the Self-Insured Institute of America.
It is the fourth subrogation issue regarding ERISA plans that the court has dealt with in recent years, and provides the clearest guidelines on general issues regarding contract language in ERISA plans, as well as on enforcement issues.
For example, it says that, in areas where the plan documents are silent, as in the allocation of attorneys’ fees, courts can step in, according to officials of the Self-Insured Institute of America.
The SIIA filed an amicus brief in the case, in partnership with the National Association of Subrogation Professionals.
The court also said that while “… equitable rules … cannot trump a reimbursement provision, they still might aid in properly construing it.”
Because the US Airways plan was silent on the allocation of attorney’s fees, “in those circumstances, the common-fund doctrine provides the appropriate default,” the court said.
As a result, US Airways can’t require the victim of an accident, who is insured by the company’s health plan, to reimburse that plan for the health care costs expended by the plan without also sharing in legal costs because the company’s health plan didn’t spell out how to handle attorney fees in its plan document, the majority ruling said.
SIIA officials said the case focused on whether plans can enforce the terms and conditions of their subrogation and reimbursement clauses as written.
“We appreciate this court ruling because it clarifies the authority of self-insured employers to administer their plan in accordance with their plan documents,” said Michael Ferguson, SIIA chief operating officer. “It also clarifies an earlier decision in Sereboff that left some issues unclear.”
The case centered on a decision of the 3rd U.S. Circuit of Appeals, based in Philadelphia.
That court ruled in the case of the US Airways employee involved in an auto accident that health plans would have to reduce their interests to account for the common fund doctrine (reducing their right to reimbursement for attorneys’ fees) and the made-whole rule (suspending their right to reimbursement unless and until the plan member recovered ample funds to cover all nonmedical damages) even when the plan specifically exempted itself from the operation of these doctrines.
“Or more simply put, can courts intervene to circumvent the lawful decisions of plan sponsors?” asked SIIA officials.