The benefits industry is awaiting several rulings from the Supreme Court of the United States expected in 2016 that could have far-reaching effects on the administration and cost of operating employee benefit plans.
Reimbursement of payments
Yesterday SCOTUS heard arguments in the case of Montanile vs. Board of Trustees of the National Elevator Industry Health Plan. The issue before the Court is whether a member of a benefit plan governed by the Employee Retirement and Income Security Act can get out of an agreement to repay health benefits from the proceeds of a lawsuit arising out of an automobile accident, by spending the money first.
The petitioner Robert Montanile was seriously injured by a drunk driver. The National Elevator Industry Health Benefit Plan paid him $100,000 for medical expenses. Montanile sued the driver and the case settled for $500,000. He spent the money on ongoing medical expenses, lawyer’s fees and care of his young daughter. Nevertheless, his health insurance administrator says he must reimburse the amount of $100,000.
Also see: “SCOTUS to weigh in on health plan reimbursement case.”
Osler New York pension and benefits counsel Carol Buckmann explains that ERISA has no specific provisions that allow plans to recover overpayments. “Therefore, the National Elevator Industry Health Benefit Plan must seek an equitable remedy. And Montanile is arguing that an equitable lien can only attach specific assets, which is no longer possible if the proceeds of the insurance settlement have been spent,” she says.
Given ongoing unease about solvency issues related to ERISA plans Buckmann believes if Montanile is successful, there could be broader implications for employee benefit plan sponsors. “The ruling will probably apply to fiduciaries trying to recover pension overpayments as well, and it may mean that overpayments can't be recovered if the participant or retiree has already spent the money,” she says.
Control of health information
The SCOTUS granted certiorari in Gobeille v. Liberty Mutual Insurance Company in June 2015. The case brought by the state of Vermont, challenges the 2nd Circuit Court of Appeals’ ruling on the ERISA preemption that bars the state from requiring self-insured employer-sponsored health plans to submit claims data to Vermont’s all-payer claims database (APCD).
Vermont is arguing that it needs certain data from Liberty Mutual, such as claims and member eligibility information, to help it improve the cost and effectiveness of health care. Liberty Mutual, however, maintains that ERISA protects the insurance company and its third-party administrator from having to hand over the information otherwise required by the state.
Trish Riley and Alice Weiss, writing for the National Academy for State Health Policy, note that 16 states including Vermont have either established or are implementing an APCD. “Because self-insured plan enrollees are disproportionately likely to be young and healthy, if the Court rules for Liberty Mutual, an entire demographic group would be largely left out of the state’s data, leaving a significant hole and possibly deterring other states from establishing or implementing an APCD,” they say.
This case is Important for employers, Buckmann says, because if SCOTUS does not rule that ERISA is pre-emptive in these circumstances, it could open the door for states to introduce further statutes imposing other requirements on ERISA plans. “That could be very onerous and difficult to coordinate for businesses operating in different jurisdictions,” she says. “It would defeat the purpose of ERISA having nationwide application that generally pre-empts state legislation.”
Birth control mandate
Most recently in early November 2015 SCOTUS announced that it would hear more than half a dozen cases dealing with just how far employers can go to prevent employees from receiving birth control coverage under their employer-sponsored health plans.
The 2014 SCOTUS ruling in favor of Hobby Lobby Stores found that regulations promulgated by the Department of Health and Human Services requiring employers to provide their female employees with no-cost access to certain forms of contraception violate the Religious Freedom Restoration Act(RFRA).
The regulations require employer-sponsored health insurance plans to include coverage for certain kinds of birth control for employees and their families but allow churches and other nonprofit organizations with religious ties or affiliations objecting to contraception on religious grounds to opt-out from providing this coverage.
After the Hobby Lobby decision, the federal government expanded these opt-out options to privately held corporations with religious objections to some or all forms of contraception.
The alternative when a group opts out of birth control coverage for its members is that they must notify the federal government of their intention to invoke this exemption (ordinarily by filling out a form) and disclose the insurance company that administers their health plan. The government then works directly with that insurance company to provide birth control plans to the employer’s workers.
A broad range of religious non-profits have brought lawsuits under the RFRA arguing that simply having to opt out and notify their insurer, thereby triggering birth control coverage for their employees through a different means, facilitates covering contraception in violation of their religious rights.
Four federal appeals courts have found that in spite of potential fines for non-compliance, the opt-out provisions do not impose a substantial burden. However, the 8th Circuit recently decided the law was not sufficiently narrow to justify the burden on non-profits. As a result SCOTUS has agreed to hear another challenge to the Affordable Care Act’s birth control mandate.
While relatively few employers will be directly impacted by a ruling that the current opt-out provisions violate religious rights, Buckmann suggests that again, such a decision could be the “thin edge of the wedge.”
“This could create a principle that is pertinent in other circumstances where companies want to challenge laws of general applicability citing the RFRA,” she says.
Sheryl Smolkin is a Toronto-based freelance writer and lawyer.
Register or login for access to this item and much more
All Employee Benefit Adviser content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access