ERISA
The dreaded ERISA lien. The vendors representing ERISA self-funded health plan’s interest certainly want you to believe that it must be reimbursed in full. They will cite the US Airways v McCutchen case, tell you that they are not subject to equitable doctrines and therefore do not have to reduce for attorney fees or limit or waive their full recovery even if your client was not made whole from a compromised settlement. We demand that an ERISA plan be fair and equitable.
The most important thing that must be fully vetted is the policy language of the ERISA plan. If you are not obtaining, reviewing, and analyzing the Plan Documents, you may be losing too many settlement dollars to repaying a reimbursement demand.
Our team dives deep into the Plan Documents after thoroughly reviewing the individual claims that create the asserted interest.
The Employee Retirement Income Security Act of 1974 (ERISA) establishes the terms of employee pension and benefit plans. According to the U.S. Department of Labor, ERISA protects the interests of employee benefit plan participants and their beneficiaries. It requires plan sponsors to provide plan information to participants. It establishes standards of conduct for plan managers and other fiduciaries. It establishes enforcement provisions to ensure that plan funds are protected and that qualifying participants receive their benefits, even if a company goes bankrupt.
Obtaining a copy of your client’s insurance benefit card is always the best way to identify the appropriate entity with a possible lien interest on the settlement funds.
ERISA governs nearly all employer health plans. The primary exceptions are government employer plans or church plans which are governed by state law. Most, if not all, ERISA health insurance plans state that injuries caused by a liable third party are not a covered expense and provide for reimbursement when a plan does pay for injury related medical expenses (often referred to as subrogation clauses).
In terms of lien resolution, the subrogation rights of an ERISA plan are loosely defined by federal code 29 USC 1132(a)(3) which allows for “appropriate equitable relief.” It is from this statute that employee benefit health insurance plans are evaluated for their validity.
ERISA Plans are identified as being either self-funded or fully insured based on the type of policy held by the employer and where the funds originate for payment of medical claims. There are two main ways to assess the funding status of the plan. Subrogation vendors will point you to the policy language (usually the Summary Plan Description (SPD)). It likely has a section indicating that it is self-funded, if they are alleging that they are collecting for a self-funded plan. It may also make a declaration that it is not an insured plan and by default is self-funded.
It is important to evaluate the Master Plan Description (MPD) of an ERISA plan to determine the validity of the lien. While the SPD is important to review, our US Supreme Court has said that it is the MPD that ultimately controls the recovery rights of the Plan.
Under the ERISA statute and the Internal Revenue Code, employee benefit plans generally are required to file the Form 5500, ‘‘Annual Return/ Report of Employee Benefit Plan,’’ including any attachments and schedules. The Form 5500 is information, required by and filed with, the Department of Labor (DOL). It serves as a disclosure document for plan participants and beneficiaries, and an important source of information and data for use by other Federal agencies.
Unfortunately, even with an 82 plus page instruction guide, these Forms are often completed incorrectly or incompletely which makes them often unreliable for determining funding status. But it can be a negotiating point if there are inconsistencies.
The first step to assess the rights of an ERISA Plan asserting subrogation or reimbursement right is a request for documents pursuant to the ERISA statute – 29 U.S.C. 1024(b)(4).
A 29 U.S.C. 1024(b)(4) request is of the import for two reasons:
- to obtain the necessary documents to evaluate the strength of the ERISA plan’s recovery rights,
- to exert pressure by means of 29 U.S.C. § 1132 (c) (1) (B) penalties.
What is a 1024 (b)(4) request?
Pursuant to 29 U.S.C. § 1024(b)(4), the administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
The key is that it must be sent to the Plan Administrator not to a Claims Administrator (an insurance company) or to a subrogation vendor.
It should be sent with a read/received receipt to begin the count for penalty if the Plan Administrator does not comply with the request.
Pursuant to 29 U.S.C. § 1132(c), any administrator who fails or refuses to comply with a request for any information which such administrator is required by this subchapter to furnish … within 30 days after such request may … be personally liable … in the amount of up to $100 a day. Pursuant to 29 C.F.R. § 2575.502c-1, the civil monetary penalty established by … ERISA is hereby increased from $100 a day to $110 a day.
ERISA Resources
Is my client’s Employee Benefit Plan an ERISA plan?
An ERISA plan is an employer provided benefit plan subject to exceptions for government or religious employers. The more important determination is whether it is fully insured or self-funded. Fully insured plans are subject to state law. Self-funded plans are subject to federal law making their contract provide the right of recovery.
Do we have to pay a lien?
In order to determine whether a lien has to be paid, a careful assessment must be made of the applicable Plan Documents with an understanding of the applicable governing law.
Do we have a legal obligation to notify the Plan of the accident and/or settlement?
The terms of an ERISA Plan will articulate the responsibilities of the parties. Typically, the Plan requires cooperation and notification in circumstances where another party may become responsible for the medical benefits the Plan has already paid.
Regardless of whether you, as the attorney, are obligated by the law in your state; your client most likely has a duty to notify the Plan of the accident and/or settlement pursuant to the terms of their health insurance contract or policy. As an extension, you as the client’s representative, could be seen as having an obligation to do so. Synergy’s recommendation is to tackle any possible lien interest head on and bring closure to your representation.
How do I obtain a copy of the Summary Plan Description and Master Plan Document?
ERISA requires plan administrators – the employer group, not the insurance company or the subrogation vendor – to provide the beneficiary with a copy of the SPD and MPD upon written request. This is called a 1024(b)(4) request. There is the laundry list of items that the plan participant is entitled to receive under the ERISA statute 29 USC § 1024(b)(4):
The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary, plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.
An administrator is required to provide the requested documents. The ERISA statute has created a civil penalty under 29 U.S.C. § 1132(c)(1) which has been increased to $110/day under 29 CFR § 2575.502(c)–(3).
Audit
The review of the ERISA Payment Summary to ensure there are no errors, duplicates or unrelated treatment is included.
Insured
An employee benefit plan where the employer has purchased a plan from an insurance company to provide benefits for their employees. The Summary Plan Description (SPD) or Form 5500 will typically identify if a plan is insured.
Master Plan Document (MPD)
The governing document outlining the coverage as well as the rights and responsibilities agreed to by the plan holder and the beneficiary. The Summary Plan Description (SPD) is a descriptive summary of the control MPD. The language may identify whether the plan is self-funded or insured under ERISA.
Plan Administrator
The Plan Administrator pursuant to a document request under the ERISA statute is the employer group. It is not the insurance company or the subrogation vendor. In order for an ERISA document request to be valid, it must be sent to the proper party.
Self-Funded
An employee benefit plan where the employer is providing health care benefits out of pocket. Larger companies are often self-funded and some may hire an insurance company in an administrative only capacity to handle claim processing and related functions. The Summary Plan Description (SPD) or Form 5500 will typically identify if a plan is self-funded.
Summary Plan Description (SPD)
Document outlining the coverage as well as the rights and responsibilities agreed to by the plan holder and the beneficiary. The language may identify whether the plan is self-funded or insured under ERISA. This is a summary of the Plan/Contract and not the Plan itself.