By: Chris Aguiar, Esq.
On the heels of the NASP conference in Austin, Texas I felt it appropriate to bring along some Holiday Cheer after a questionable 2016. Everything in the subrogation world in 2016 was viewed through the prism of the Montanile decision where the Supreme Court ruled the a plan who allowed its participant to obtain a settlement fund and not do enough to enforce its reimbursement right could be held without a remedy if the participant spent the settlement funds on non-traceable assets. After 15 years of decisions favoring benefit plans, Montanile seemed like a little bit of coal under the tree, and some worried that it signaled a shift that might lead to more scrutiny on benefit plans and burdens being shifted onto benefit plans in order to enforce their rights. I’m happy to report this Holiday season that those fears may have been premature.
I just returned from Austin, Texas where the Country’s best and brightest subrogation attorneys converged at the NASP Conference to chat about the year in subrogation and I can tell you that 2017 has given us a fair amount to be thankful for and hope that the tide has not turned as courts continue to render decisions that are favorable to benefit plans. For example, in Mull v. Motion Picture Indus. Health Plan, 2017 U.S. App. LEXIS 13949, the 9th Circuit joined the 5th, 6th, & 11th Circuits in deciding that a recovery provision referenced only in an SPD can be enforceable when the SPD is adopted as all or part of the plan.
There also appears to be some positivity surfacing in the courts for MAO’s and their ability to enforce the same rights and obligations upon Medicare recipients as traditional Medicare. Courts historically held that MAOs did not have an implied federal right of action to sue primary payers in Federal Court. Over the past year, however, courts have ruled that there is indeed a right of action and that, much like with traditional Medicare, there can be severe penalties levied against parties who do not comply with the requirements of reimbursement under the Medicare Secondary Payer Act, such as treble damages as well as fines of $1,000.00 a day for a carrier’s failure to report.
So, don’t let Montanile and 2016 get you down. There are several strategies that can be utilized to both ensure that a plan participant and/or their attorney will cooperate with a plan’s right of reimbursement, and in the event that funds do get disbursed – that isn’t the end of the analysis. And as is often the case with the law, if you wait long enough the law changes. The important thing is to make sure you have the resources to stay abreast of all the changes and strategies to maximize recoveries.
Now enough about subrogation … let’s go get ready to spread some actual Holiday Cheer ….. a Merry Christmas and Happy Holidays to all!
By: Kelly Dempsey, Esq.
The drug addiction crisis in many parts of the United States is a reoccurring news headline, so it’s no secret that the prevalence of medical claims related to driving while under the influence of drugs and/or alcohol also appears to be on the rise. Illegal acts and illegal drugs exclusions are prevalent in self-funded plan documents, but the million dollar question is does the wording in the plan document align with the plan’s intent?
There are many different versions of illegal acts exclusions – some include references to misdemeanors or felonies, while others refer to acts that are punishable by any period of incarceration. The first step to ensuring the plan language meets the needs of the employer is to determine what types of acts the employer intends to include in the illegal acts exclusion. This doesn’t mean the plan needs to specifically list examples of illegal acts but instead use broader descriptions. For example, a plan could exclude felonies and misdemeanors, but not civil infractions or minor traffic violations. Unfortunately illegal acts exclusions can be a bit more complex because of variations in state law so it’s important that employers keep this in mind. It’s of the utmost importance that the plan creates an exclusion that outlines the employer’s intentions and motivations for what should be considered excluded under their illegal acts exclusion.
The plan administrator of a self-funded plan will always retain discretionary authority to interpret the terms of the plan document. While self-funded plans have broad discretionary authority as a fiduciary, the plans must ensure this discretion is utilized in a uniform and consistent manner. For example, a self-funded plan cannot be discriminatory with claim payment (i.e. deny claims for Sally who is in a DUI, but pay claims for Joe who was in a DUI). However, in order to avoid a breach of that fiduciary duty in use of their discretion, the plan administrator must not act in an arbitrary or capricious fashion. As we’ve seen in the recent Macy’s court case, it’s important to align plan language with how the claims are administered – so the plan will also need to ensure that the third party claims administrator can process claims in a manner that aligns with the plan’s intent.
As with all exclusions, illegal acts exclusions must be reviewed on a case by case basis to determine their applicability. The key factors are generally a combination of the facts of the specific situation, how the exclusion is worded, and applicable state law and/or guidance. Ultimately, the plan will be using its discretionary authority when determining whether or not to exclude coverage.
By: Ron E. Peck, Esq.
I am tired; so very tired. Is it my two year old son, waking up in the middle of the night and begging to play with his toy choo choo? No. It’s the posts and articles written by individuals such as Dave Chase, and our own Adam Russo, which keep me up. In particular, it’s their entries discussing fiduciary obligations, and breach of duty. For some time now, we’ve been hearing about employees suing employers over mismanagement of 401(K) and pension plans. These fiduciaries are being accused, by the employees of wasting the plan’s (aka their) money on less-than-advisable investments. From Lorenz v. Safeway, Inc., 241 F. Supp. 3d 1005, 1011 (N.D. Cal. 2017) to McCorvey v. Nordstrom, Inc. filed in the California Central District Court on November 6, 2017, this year has been replete with examples of employees holding fiduciaries’ feet to the fire when it comes to prudently managing plan assets.
In each situation, the fiduciary invests the plan’s money, or uses the plan’s money, to purchase less than stellar investments or excessive fees. The plaintiffs in these cases have literally said that their plan fiduciary used plan assets to pay one fee to one vendor, when another vendor could have done the same (or better) job for half the price. Yes – they are talking about 401(K) fund management… but you and I both know that if this same plaintiff (and their attorney) knew self-funded health plans are paying one facility one-thousand-times more to do something that another facility would have done as well for thousands less … that these benefit plans are overpaying claims in error and not seeking to recoup refunds … that these benefit plans are paying claims for which a third party is responsible and are not seeking reimbursement … that these benefit plans are accepting insignificant discounts on inflated provider charges – simply to enjoy the peace and quiet that comes from using a wrap network for out of network claims … if plan beneficiaries (investors) knew about these and other ways their plan fiduciaries waste and abuse plan funds, I’m confident a similar lawsuit would soon follow.
We are all very lucky that the brokers, administrators, and fiduciaries managing 401(K) and pension plans were the first target, as it serves as a warning for those of us in the health benefits arena to shape up and take action now, before it’s too late. The writing is on the wall; what will you do about it?
A new year is approaching, and we are in the middle of renewal season; meaning it’s time for some serious preparation. Making sure your clients are cared for is no easy task; are you prepared to protect your plans, save them money, and grow your own business in 2018?Join The Phia Group’s legal team discuss where the market is heading and what you need to do to keep up with it.Click Here to View Our Full Webinar on YouTubeClick Here to Download Webinar Audio OnlyClick Here to Download Webinar Slides Only