By: Chris Aguiar, Esq.
The health benefits industry can feel like a whirlwind, especially for self-funded plans. We always seem to be running around trying to figure out how to comply with the law, only to have it change and start the cycle all over again. We are experiencing this as we speak with the Affordable Care Act (a.k.a. Obamacare) and its possible successor, the American Health Care Act. As a result, we tend to move on from issues more quickly once they seem to be resolved, even though perhaps they linger.
Remember McCutchen? In the subrogation world, U.S. Airways v. McCutchen was a big deal. It finally answered the question that every benefit plan, TPA, and recovery vendor was fighting over since the beginning of time on their subrogation cases; can a court override the terms of a private, self-funded benefit plan under the purview of ERISA? U.S. Airways lost the case, but the decision that now clarified and established the law was clear; specific unambiguous plan language rules the day. Of course, the Montanile decision threw a bit of a curveball into our world, but that’s a blog post for another day. Fast forward almost four years (that’s right, the Supreme Court decision in McCutchen came down in 2013 – can you believe it was already that long ago?); does anyone know what happened to U.S. Airways?
In addition to what turned out to be the main issue in the McCutchen case, that the plan terms were not good enough for the Third Circuit, there were many more issues to consider when the case was remanded (i.e. sent back) to the lower courts for additional findings. As it turned out, U.S. Airways utilized BOTH a Summary Plan Description (SPD) and a Plan Document (PD). That alone was not the kiss of death, but the SPD explicitly provided that the terms in the PD controlled if there was a conflict. Unfortunately for them, there was! The SPD provided for recovery from McCutchen’s underinsured motorist coverage (UIM), but the PD did not. Since the PD was the controlling document in that case, U.S. Airways was not entitled to a recovery against the UIM.
So what was the ultimate outcome? U.S. Airways was entitled to assert its $64,000.00 lien against $10,000.00 in liability coverage rather than against $100,000.00 in UIM coverage. It is important to know all of the facts and understand all of the factors that might impact your case. As we saw in U.S. Airways v. McCutchen – language in the SPD and/or PD was deficient and contradictory – and that led to U.S. Airways losing out on recoveries as well as the costs of bringing those actions. Every case is different, and every entity has its own motivations as to why they engage in litigation, but it is important to make sure you have all your ducks in a row and that you have the tools needed to actually win the fight, or you might get stuck holding the bag. The McCutchen case helps us in the subrogation world every single day because of what the Supreme Court ultimately held, but the law can change on any given day. Make sure you are prepared for the whirlwind!