August 29, 2008
12:00 a.m. Eastern Time
Supreme Court MetLife Decision May Lead To More Approved Employee Health Benefit Claims, And More Litigation Over Denied Claims
Court Decision Gives Employees Greater Latitude To Invoke Plan Administrators’ Conflict Of Interest In Suits Seeking To Reverse Claim Denials
Bethesda, MD -- A recent Supreme Court decision will likely lead to more approvals of health insurance claims submitted by employees and more litigation over those claims that are denied, a legal scholar concludes in a Health Affairs Web Exclusive published today. http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.5.w430
The Supreme Court’s June 2008 decision, Metropolitan Life Insurance (MetLife) v. Glenn, interpreted the Employee Retirement Income Security Act (ERISA), the federal statute that governs the health, disability, and pension benefit plans of employers. The Court recognized the conflict of interest that often faces ERISA plan administrators: Under ERISA, the plan administrator -- either the employer itself or a third-party insurer -- often both evaluates the claims made by employees and pays the claims it decides to approve.
In MetLife, the Supreme Court made it easier for this conflict to be invoked in court by employees who sue the plan administrator to reverse denied claims. The case involved the denial of a disability claim by MetLife, the plan administrator for the disability benefits ERISA plan offered to Sears employees, but the rules announced by the Court in its opinion apply to lawsuits over denials of claims for health benefits as well.
What Does The MetLife Decision Mean
For Employer-Based Health Coverage?
The MetLife decision “clarifies issues that have divided the lower federal courts. Insured and self-insured ERISA plans are indeed conflicted, and although their determinations are not to be retried by the federal courts [from scratch], the lower courts should not uphold determinations simply because they are not ‘off the wall’,” writes Tim Jost, the Robert Willet Family Professor in the Washington and Lee University School of Law. The conflict is “a factor” that a court must consider in reviewing a claim determination. “This is good news for ERISA beneficiaries, who not only will receive a more thorough review of their claims, but also will have a right to discovery to probe an administrator’s decision-making process,” Jost says.
“Increased scrutiny of plans’ decisions likely portends more approvals of ERISA benefit claims and more lawsuits challenging claims denials. This may raise the cost of some ERISA plans, which may mean that additional employers will drop health coverage or increase employee cost sharing or premiums, causing additional employees to forgo coverage,” Jost acknowledges. “But if the only way we can keep employment-related coverage functioning is by improperly denying workers benefits, is the system worth preserving?” he asks.
In any event, Jost notes, the Court in MetLife gave ERISA plans a way to reduce the chance of having a conflict of interest held against them in a lawsuit: Conflicts should receive less consideration when plan administrators had “taken active steps to reduce potential bias and promote accuracy, for example, by walling off claims administrators from those interested in firm finances, or by imposing management checks that penalize inaccurate decisionmaking irrespective of whom the inaccuracy benefits,” the Supreme Court declared in its decision.
Jost's article will be available when the embargo lifts at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.5.w430
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Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org. The full text of each Health Affairs Web Exclusive is available free of charge to all Web site visitors for a two-week period following posting, after which it will switch to pay-per-view for nonsubscribers. Web Exclusives are supported in part by a grant from the Commonwealth Fund.
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