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November 2005 |
This report was produced by the Advisory Council on Employee Welfare
and Pension Benefit Plans, which was created by ERISA to provide advice to
the Secretary of Labor. The contents of this report do not necessarily
represent the position of the Department of Labor. |
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This report was produced by the Advisory Council on
Employee Welfare and Pension Plans, which was created by ERISA to provide
advice to the Secretary of Labor with respect to the carrying out of its
functions under ERISA and to submit recommendations with respect to those
functions. The contents of this report do not represent the position of
the Department of Labor (DOL). The 2005 ERISA Advisory Council formed a
Working Group (hereinafter referred to as the Working Group) on Health and
Welfare Benefit Plans’ Communications to assess just how well the
material distributed by employer sponsors to participants and
beneficiaries of health and welfare plans achieved the following goals of:
-
Accessibility
-
Appropriate media mix (hard copy,
on-line and others)
-
Understandability
-
Conciseness
-
Timeliness
-
Legal Compliance, Full Disclosure
-
Recourse to the courts
Testimony to the Working Group was provided on July 7,
2005 and September 21, 2005 by four plan administrator advocates, three
insurer and/or service providers (third party administrators (TPAs)), and
five employee or employee organization advocates (including an actual
participant covered under a disability plan). One witness’ testimony on
September 22, 2005, before the Working Group on Retirement Plan
Distributions was relevant to this Working Group’s report and thus was
utilized. (The witnesses and their testimony are provided in the appendix
and transcripts.)
After careful debate and analysis of the issues and
transcripts, the Working Group submits the following recommendations to
the Secretary of Labor for consideration on two different topics:
With respect to Summary Plan Descriptions (SPD)
-
Short-Term Recommendation 1:
Provide regulatory or advisory guidance to help plan administrators
prepare understandable and user-friendly SPDs. Affirmation that the
use of Executive Summaries or Life Event Summaries is considered a
best practice would be extremely helpful.
-
Short-Term Recommendation 2:
Enhance or create mechanisms to enforce the regulatory requirement
that SPDs be understandable by the average plan participant.
-
Long-Term Recommendation:
Review court decisions granting legal superiority to SPDs and, if
necessary, propose legislation to amend ERISA to restore the original
purpose and status of SPDs that satisfy regulatory requirements.
With respect to the Notice of Benefit Determinations
-
Recommendation 1: Require disclosure of the specific
functions of the plan sponsor, the plan administrator, and if applicable,
TPA/insurer relating to the claims adjudication process, along with the
fiduciary responsibility associated with each of the various functions and
the conferment of any grants of discretionary authority to the claims
adjudicator with respect to determining eligibility and/or the terms of
the plan.
-
Recommendation 2: Require disclosure of any conflicts
of interest on the part of the claims adjudicator; however, DOL guidance
is needed to identify conflicts of interest in this context.
-
Recommendation 3: Affirm fiduciary status for TPAs, who
have been and are continuing to deny fiduciary status with respect to
their initial determination of benefits, on the premise that the plan
administrator is the final arbitrator of benefits under the plan.
-
Recommendation 4: Require that TPAs retain copies of
the SPDs, SMMs, and the plan document, including all amendments, for the
time period required under ERISA.
The Working Group believes that these recommendations
will further enable the DOL to meet its goals of providing plan
participants and beneficiaries of health and welfare plans with useful
information to support the voluntary employee benefit structure for
Americans and their families.
Respectfully submitted,
Advisory Council Working Group Members
-
Kathryn J. Kennedy, Chair, The John Marshall Law School
-
Charles J. Clark, Vice Chair, Aon Consulting
-
R. Todd Gardenhire, ex-officio, Chair of the ERISA
Advisory Council, Smith Barney
-
Sherrie Grabot, ex-officio, Vice Chair of the ERISA
Advisory Council, GuidedChoice Inc.
-
C. Mark Bongard, Ashland Inc.
-
Lynn L. Franzoi, Fox Entertainment Group Inc.
-
Neil S. Gladstein, International Association of
Machinists and Aerospace Workers
-
Timothy W. Knopp, Central Oregon Builders Association
-
Thomas C. Nyhan, Central States Funds
-
Antoinette Pilzner, Butzel Long
This Working Group Report is divided into five
sections
-
Section I introduces the scope of the issues
identified and investigated;
-
Section II sets forth commonly defined terms and the
current communication requirements applicable under ERISA, the DOL
regulations and case law;
-
Section III summarizes the plan administrators’
issues, the insurers’/TPAs’ issues, and the participants’ issues, in
light of the testimonies provided to the Working Group;
-
Section IV provides the Working Group’s
observations and discussions in the context of these varying concerns and
then sets forth our specific recommendations;
-
Section V summarizes the witnesses’ testimonies.
The 2005 Working Group on Health and Welfare Benefit
Plans’ Communications was formed to assess just how well the material
distributed by employer sponsors to participants and beneficiaries of
health and welfare plans achieved the following goals of:
-
Accessibility
-
Appropriate media mix (hard copy, on-line and others)
-
Understandability
-
Conciseness
-
Timeliness
-
Legal Compliance, Full Disclosure
-
Recourse to the courts
The scope of the study will be to ascertain whether
such plan participants understand benefits under health and welfare plans
and whether the existing required communication tools (e.g., SPD, SAR,
claims procedure rules) are accomplishing their original goal of full
disclosure, as set forth in ERISA §2(b) (Findings and declaration of
policy).
Congress enunciated that the interests of plan
participants and beneficiaries are protected by requiring disclosure and
reporting of financial and other plan information and by providing ready
access to federal courts. The DOL has regulatory authority over ERISA’s
reporting and disclosure requirements and thus may rule as to the type of
reporting and disclosure that would be meaningful to plan participants and
beneficiaries.
In the health and welfare context, the following
information is required to be disclosed to participants and beneficiaries
(more fully explained at www.dol.gov/ebsa/pdf/rdguide.pdf):
-
Summary Plan Description (SPD)
-
Summary of Material modifications to the plan (SMM)
-
Summary Annual Report (SAR)
-
Notification of Benefit Determination
-
Plan Documents
For health plans only, additional information to be
disclosed includes:
-
Summary of material reduction in covered services or
benefits
-
Certain COBRA notices and certificate of creditable
coverage
-
Certain notices relating to preexisting condition
exclusion
-
Notice of special enrollment rights
-
Certain notices relating to Women’s Health and Cancer
Rights, Qualified Medical Child Support Orders (QMCSO) and federal and
state requirements relating to hospital length of stay in connection with
childbirth
Among the hoped for results are a determination of
whether:
-
SPDs for health and welfare plans properly explain to
participants and beneficiaries their benefits;
-
SARs provide financial information that is
understandable and useful to participants and beneficiaries; and
-
Notification of Benefit Determination adequately
describes
-
The specific identity of the plan administrator and
insurer (if applicable) and the specific discretion that is afforded to
either or both under the terms of the plan;
-
The scope of information disclosed by the plan
administrator and/or insurer upon request, used by the plan in the claim
process, developed during the claim process and during the claim appeal;
-
Consequences of non-compliance with claims
regulations.
Following is the list of questions (represented as not
exhaustive) distributed to Potential Witnesses prior to the Testimony in
July and September 2005
-
What is the minimal disclosure that must be
contained in the plan’s SPD so that participants and beneficiaries
understand the terms of the plan, level of benefits, reduction in
benefits, and processing of claims?
-
Is there a recommended format for the SAR that would
provide participants and beneficiaries adequate and sufficient information
regarding the financial status of the plan?
-
Is there a recommended format for the Notification
of Benefit Determination so that the participant and beneficiary knows how
to appeal a claim denial, how to identify the plan administrator and any
insurer and the level of discretion afforded to either or both under the
terms of the plan; scope of information disclosed by plan administrator
and/or insurer upon request, used by the plan in the claim process,
developed during the claim process, developed during the claim appeal; and
consequences of non-compliance with claims regulations?
-
Do the current DOL claims procedure regulations
accomplish their goals of effectively disclosing the rationale for denial
of benefits; the process and access to information for appealing the
denial; and the perfecting of an ERISA cause of action for denial of
benefit claims?
-
If we had a blank slate with respect to
communication tools for participants, what’s the point of all these
tools?
-
Can you describe your benefit plan?
-
What notices do we need beyond the SPD and
SAR?
-
Would a standardized format for the SAR be helpful?
-
How would it dovetail with the 5500?
-
Explain the insurance relationship, who is the plan
sponsor, the plan administrator, and the insurer.
-
Should information on 5500 be expanded?
-
H&W plan: A health and welfare plan as defined in
ERISA §3(1)
-
Self-insured H&W plan: A plan that retains full
obligation for plan benefits
-
Fully insured H&W plan: A plan whereby benefits are
covered by an insurance company
-
SPD: A summary plan description as defined in ERISA
§102.
-
SAR: A summary annual report as defined in ERISA §103
-
Notice of Benefit Determination (otherwise known as
Explanation of Benefits (EOB)): Written notice to any participant or
beneficiary regarding an adverse benefits denial and the opportunity for a
full and fair review of such denial in accordance with ERISA §503.
-
Fiduciary: A person or entity that satisfies the
requirements of ERISA §3(21)(A). Such person or entity may be named by
the plan document or will be held to be a fiduciary due to his/her
exercise of discretion with respect to the management of the plan or
disposition of its assets.
-
Plan administrator: The person designated by the terms
of the plan or instrument under which the plan is operated; if no such
person is designated, then the plan sponsor, and if the plan sponsor
cannot be identified, the person designated by the Secretary of Labor
under the regulations. Third party administrator (TPA) is a person or
entity contracted with the plan administrator or plan sponsor to
adjudicate claims under a plan.
Summary Plan Descriptions (SPDs) Requirements -
ERISA §101(a)(1) requires that the plan administrator
of a covered employee benefit plan furnish to each participant and
beneficiary who is receiving benefits, a SPD (as described in ERISA
§102(a)(1)). With respect to the Working Group’s particular focus, an
SPD under ERISA §102(a) is required to include the following information:
-
In the case of a group health plan, whether the health
insurance issuer is responsible for the financing or administration
(including payment of claims) of the plan and if so, the name and address
of the issuer
-
The name and address of the agent for the service of
legal process, if such person is not the plan administrator
-
The name and address of the plan administrator
-
The names, titles and addresses of any trustee or
trustees (if different from the administrator)
-
A description of the relevant provisions of any
applicable collective bargaining agreement
-
The plan’s requirements respecting eligibility for
participation and benefits
-
Circumstances which may result in ineligibility or
denial of benefits
-
Source of financing the plan and identity of the
organization through which benefits are provided
-
The procedures to be followed in presenting claims for
benefits under the plan, including notice that the participants may seek
assistance or information from the DOL regarding their rights and the
remedies available under the plan for redress of denied claims.(1)
The DOL regulations require that the SPD be “written
in a manner calculated to be understood by the average plan participant
and shall be sufficiently comprehensive to apprise the plan’s
participants and beneficiaries of their rights and obligations under the
plan (emphasis added).”(2) In fulfilling this duty, the plan administrator
is cautioned to consider the level of comprehension and education of the
typical plan participants and the complexity of the terms of the plan.
Thus, technical jargon and long complex sentences should be avoided or
limited. The SPD should not be misleading or misinforming and any
exceptions, limitations, reductions or other restrictions of plan benefits
must not be minimized nor deemphasized.
Summary Annual Reports Requirements -
Under ERISA §103, SARs are required to be published
with respect to every covered employee benefit plan disclosing financial
statements, and if applicable, an accountant’s opinion as to the
examination of the plan’s financial statement. Given that health and
welfare benefits are generally paid by the employer sponsor on a
pay-as-you-go basis, the financial statement regarding the plan’s
financial health is of less importance than in the context of a covered
pension plan. The testimonies of our witnesses did not focus on the
adequacy of the SARs.
Notice of Benefit Determinations Requirements - The provisions of ERISA §502 provide for private
causes of actions for participants and beneficiaries, including denial of
benefits. As such, ERISA §503 requires every employee benefits plans to
provide adequate written notice when a claim has been denied, “setting
forth the specific reasons for the denial and written in a manner
calculated to be understood by the participant (emphasis added).”(3) The
plan is also required to provide reasonable opportunity for the
participant or beneficiary for a full and fair review by an “appropriate
named fiduciary” of the decision denying the claim.(4)
When a participant or beneficiary requests payment for
benefits, the plan administrator is required to provide the following
information either through the SPD or a separate document that accompanies
the SPD:
-
The plan’s claim procedures and procedures for filing
claim forms which provide notifications of benefit determination and
review of adverse benefit determination.
-
The time frame afforded for the outcome of the claim;
in this regard, group health claims have different time frames for
resolution than disability or pension claims.(5)
If the claim for benefits is denied, the DOL
regulations require the plan administrator to provide the following
information:
-
An explanation of the reason for the denial, the
specific plan provisions applicable in deciding the denial, and a
description of any additional material or information necessary to perfect
the claim (including an explanation of why such information is necessary);(6)
-
A description of the plan’s review procedures and
applicable time limits, including a statement of the claimant’s right to
bring a civil action under §502(a) of ERISA;(7)
-
For adverse benefit determinations in the health and
disability context, if an internal rule, guideline, protocol or other
similar criterion was relied upon in making the adverse determination, a
statement that such rule, etc. was relied upon and that a copy of such
rule, etc. will be provided free of charge upon request;(8)
-
For adverse health and disability benefit
determinations, if the adverse determination is based on a medical
necessity or experimental treatment or similar exclusion or limit, an
explanation of the scientific or clinical judgment for the determination
(applying the terms of the plan to the claimant’s medical circumstances)
or a statement that such explanation will be provided free of charge upon
request;(9) and
-
For adverse health benefit determinations involving
urgent care, a description of the expedited review process applicable to
such claims.(10)
In the case of an adverse benefit determination, the
claimant has a right to a timely full and fair review.(11) According to the
DOL regulations, this right will be deemed to be satisfied given that the
claims procedure:
-
Provides the claimant be notified of an adverse
determination within a reasonable amount of time following request for
review;(12)
-
Provides the claimant with the opportunity to submit
written comments, documents, records and other information relating to the
claim for benefits;(13)
-
Provides that the claimant shall be provided (upon
request and free of charge) reasonable access to, and copies of, all
documents, records, and other information relevant to the claim.(14) A given
document, etc., is deemed “relevant” for this purpose if:
-
If it was relied upon in making the benefit
determination;(15)
-
If it was submitted, considered or generated in the
course of the benefit determination, regardless of whether it was relied
upon in making the benefit determination;(16)
-
If it demonstrates compliance with the portion of
the DOL regulations that require the plan provisions be applied
consistently with respect to similarly situated claimants;(17)
-
For health or disability benefit claims, if there is
a statement of policy or guidance concerning the denied treatment option
or benefit for the claimant’s diagnosis, regardless of whether such
statement was relied upon in making the benefit determination.(18)
-
Provides for a review that takes into account all
comments, documents, records and other information submitted by the
claimant, without regard as to whether it was submitted or considered in
the initial benefit determination.(19)
If the claimant’s adverse benefit determination is
affirmed by the named fiduciary, he/she has recourse to pursue a cause of
action under ERISA §502(a)(1)(B). While ERISA is silent on the applicable
judicial standard of review, the Supreme Court in the Firestone v. Bruch
decision rendered a de novo standard as the presumed judicial standard in
ERISA benefit denial cases.(20) The de novo standard permits the courts to
decide the issue without deference to either party’s interpretation, by
looking at the terms of the plan and other manifestations of the parties’
intent.(21)
The de novo standard can be avoided if the terms of the
plan give discretionary power to the plan administrator or TPA to
determine eligibility for benefits and/or to construe the terms of the
plan.(22) In this situation, the Supreme Court in Firestone held that the
deferential arbitrary and capricious standard of review controls. The
majority of circuits have held that this standard of review is highly
deferential.(23) Under this standard, courts will affirm the decision of the
plan administrator or TPA unless it was arbitrary, capricious, made in bad
faith, or not supported by substantial evidence.(24) That decision does not
have to be the only reasonable interpretation; in fact, it need not even
be the best interpretation.(25)
The circuit courts have struggled as to what plan
language is necessary to confer discretionary power.(26) The Seventh Circuit
has provided model language that it deems sufficient to provide a grant of
discretionary power.(27) The courts are not clear as to whether the grant of
discretionary power must be given by the employer sponsor, or whether the
plan administrator or TPA may grant itself discretionary power.
If the plan administrator is operating under a conflict
of interest and the arbitrary and capricious standard is applicable, the
Supreme Court in Firestone directed the courts to weigh that factor in
determining whether the administrator abused its discretion.(28) All of the
circuits have attempted to adjust the deferential standard of review in
conflict of interest cases, but the results vary dramatically depending on
the circuit.(29) Since the utilization of the arbitrary and capricious
standard of review by the courts is so outcome determinative in benefit
denial cases, claimants do not realize the importance of the initial
benefits determination and the full and fair review hearing (when the plan
document confers discretionary power). The current DOL regulations do not
require disclosure as to whether the plan administrator or TPA making the
benefits determination has been granted discretionary authority under the
plan nor whether the plan administrator or TPA is operating under a
conflict of interest.
Courts have generally required the participant to
exhaust the plan’s internal claims procedures as a prerequisite to
filing suit.(30) However, exhaustion is not required if those claims
procedures do not comply with the DOL regulations or the claimant was
improperly denied the ability to present a claim at the plan level.(31)
The description and questions were given to all of the
witnesses in advance of their testimony. The witnesses were all told that
the questions were merely a starting point to generate thought and
discussion of the issues to be studied. The questions were not intended to
limit the parameters of their testimony.
As a result of the testimonies and discussions with the
Working Group, two problems surfaced with respect to plan communications
with participants and beneficiaries of H&W plans:
-
Content, utility and distribution of SPDs, and
-
Understandability, utility and legal compliance of
Notification of Benefit Determination.
Thus, the Working Group decided to focus only on those
two items, even though some of the witnesses made remarks regarding other
plan communication requirements.
Plan Administrators’ Issues
The Working Group heard from four plan administrator
advocates.(32)
Regarding SPDs -
The consensus of the plan administrator advocates was
that the DOL’s requirement that SPDs be written in a manner calculated
to be understood by the average participant has become almost impossible
to attain. The reasons were multiple:
-
The terms of employee plans, especially health and
welfare plans, are becoming exceeding more complex and new consumerism
concepts are being introduced to reduce costs;
-
Due to case law that has resolved discrepancies between
the SPD and the plan document in favor of the SPD, SPDs have become more
legalistic in an effort to mitigate the employer’s risk;
-
Employers are utilizing a vast array of communication
tools, using more manageable bytes of information and delivered at
teachable moments, in lieu of relying upon a single document to explain
benefits; and
-
The administrative cost of developing, producing and
distributing hard copies has become burdensome.
The plan administrator advocates did not advocate less
disclosure to participants and beneficiaries. In fact, Michael Tomasek, a
partner at the law firm of Schiff Hardin, advocated that plan
administrators be required to conduct initial and periodic training
sessions for participants, as it was apparent that participants do not
read, nor do they understand the SPDs provided to them.
Plan administrator advocates affirmed the goal that the
SPD be written in a manner easily understood by the participant. It was
recommended that the DOL provide model language that sponsors could rely
upon and that the DOL permit other media forms beside hardcopy for the
dissemination of required materials. The general consensus was not to
impose more burdens on plan sponsors than already required.
Regarding Notification of Benefit Determination -
Only two plan administrator advocates spoke to this
issue. Mr. Tomasek testified that there was a lack of compliance with the
DOL claim procedure regulations and a lack of enforcement by the DOL with
such regulations.(33) Nonenforcement of the claims regulations makes it
difficult for plan administrators to justify the additional costs and
burdens of compliance. As a result, he advocated that the notice of
benefit determination be organized into four sections:
-
“Notice of and Reasons for Denial” section, which
clearly states the denial, in whole or in part, and the plan provisions
requiring the denial;
-
“Information Regarding Your Claim Decision,” which
identifies the name and address of the person or entity responsible for
making the claim decision and provides a statement that a copy of the
information relied upon is available upon request;
-
“How to Appeal” section, which identifies the name
and address of the party responsible for considering the appeal and
instructs the participant to set forth in writing the reasons why the
claim should not have been denied; and
-
“Your Right to Sue” section, which advises the
participant of the right to file suit in the event the claim is denied
upon exhaustion of the appeal process, the right to sue if the plan fails
to comply with the claim procedures set forth in the SPD, and the judicial
standard of review the plan administrator intends to be applicable.
Helen Darling, President of the National Business Group
on Health, testified that there is compliance between plan administrators
and employees regarding communication requirements, but that the
information required to be disclosed in connection with claim denials (e.g., specific protocol) was voluminous and increased the responsibility
of the plan administrator.
Service Providers’ Issues
The Working Group heard from three service provider
advocates – two representing health and welfare insurers and/or TPAs and
one representing a disability TPA.(34)
Regarding SPDs -
Paul Boulis, Senior Vice President of the National
Division for Blue Cross and Blue Shield of Illinois, testified that it was
almost impossible to provide the answers to all possible benefit questions
due to the overwhelming complexity of health plan designs. Therefore,
health providers are relying on a variety of information vehicles –
customer telephone representatives; interactive Internet-based tools; and
required ERISA materials.
Regarding Notification of Benefit Determination -
Jacqueline Paul testified on behalf of Humana, Inc., a
health care provider with 7 million plan participants, as well America’s
Health Insurance Plans (AHIP), a trade association of 1,300 health
insurance plans providing coverage to more than 200 million participants.
The difficulties facing these insurance providers, in her opinion, are a
result of the complex and overlapping dual regulatory structure of both
federal and state regulation. To maximize efficiencies and reduce costs,
most insurance plans were designed to comply with all applicable state and
federal requirements. Thus, Ms. Paul recommended uniformity of federal and
state regulation and educational outreach efforts to inform state
regulators of the requirements of ERISA. She also testified that the plan
administrators were in compliance with the DOL claims regulations and that
the “deemed exhaustion” penalty was sufficient incentive for
compliance.
Andrew Bernstein, Vice President and General Counsel of
Disability RMS, Inc., stated that participants did not understand the
difference between the plan administrator and the TPA, nor the various
roles of the insurer, plan sponsor and plan administrator in determining a
claims denial. He recommended that the DOL consider clarifying the
difference between the plan administrator and the TPA. He advocated that
the denial letter contain an exact quote of the plan provisions that were
applicable in denying the claim and an explanation as to what the
participant needed to do to perfect the claim. Because some state
insurance commissioners have taken the position that discretionary clauses
in an insurance policy are illusory, he also recommended that the DOL
issue guidance that discretionary authority is acceptable language in an
ERISA governed insured plan.
Regarding fiduciary roles -
Paul Boulis orally testified that the TPA was not a
fiduciary if the plan sponsor had the ultimate decision to pay or deny the
claim. Based on case law, he believes this contradicted ERISA’s
definition that conferred fiduciary status on any person that had
discretionary authority to determine benefits, even if a subsequent
fiduciary upon review, could pay or deny the claim. Mr. Bernstein,
representing a disability TPA, affirmed his view that a third party
administrator is a claims fiduciary, even if it was not making the final
appeals decision.
Participants’ Issues
The Working Group heard from five employee advocates,
including an actual plan participant who initially been denied disability
benefits from a TPA/insurer, but then later paid withheld benefits.(35) From
the participants’ perspective, the issues vary depending on whether the
claim was a health claim or a disability claim. The Working Group on
Retirement Plan Distributions & Options heard from a public advocate
regarding the plan fiduciary’s duty of loyalty in the context of
selecting an annuity provider. Testimony from that advocate is relevant to
this Working Group’s discussion as well.
Regarding SPDs -
Steven Sleigh, Director of Strategic Resources for the
International Association of Machinists and Aerospace Workers (IAM),
criticized SPDs for being written for health care professionals, but not
every day people. Mary Ellen Signorille, Senior Attorney in the AARP
Foundation Litigation, viewed the SPD as two parts – one of benefits and
one for participant’s rights. With respect to the first part –
benefits – participants typically do not understand limits imposed under
the plan; the relationship between employer-provided health care, COBRA
and Medicare; and how a merger or acquisition would impact their benefits.
Regarding Notification of Benefit Determination -
The DOL regulations presently do not require that the
participant be notified as to whether the claims adjudicator has
discretion to determine eligibility and/or construe the terms of the plan.
Ms. Signorille and Mark DeBofsky, a partner at the law firm of Daley,
DeBofsky & Bryant, strongly agreed that participants did not
understand the meaning of a discretionary clause, its relevance to the
adjudicator’s denial, and its impact on the judicial review of such a
denial.
With respect to the discretionary clause, Mr. DeBofsky
highlighted several problems:
-
There is still conflict among the circuits as to what
language is sufficient to confer discretionary authority;
-
In the disability context, there is often times not a
plan document (just an insurance policy) and the insurer confers upon
itself discretionary authority; hence there is no written grant of
discretion from the plan sponsor to the insurer; and
-
There is conflict among the circuits as to whether the
discretionary language has to be in the certificate of coverage, the SPD
and/or the plan document.
Mr. DeBofsky and Ms. Signorille recommended the DOL
provide model language explaining the relevance of a discretionary clause
on the judicial standard of review of a participant’s cause of action.
One participant advocate recommended the DOL provide model plan language
as to what constitutes a grant of discretionary authority (e.g., relying
perhaps on the language in the Seventh Circuit case of Herzberger).
Professor Dana Muir testified before the Working Group
on Retirement Plan Distributions on the issue of requiring defined
contribution plans to provide annuity options. She discussed the DOL’s
Interpretative Bulletin 95-1, as it set forth the plan fiduciary’s duty
of loyalty in the selection of an annuity provider. It requires the
fiduciary to “take steps calculated to obtain the safest annuity
available, unless under the circumstances it would be in the interests of
the participants and beneficiaries to do otherwise.” The Fifth Circuit
in Bussian v. RJR Nabisco Inc., did not adopt the DOL’s interpretation,
but instead held that the fiduciary duty of loyalty would be judged “with
an eye single to the interests of the participants and beneficiaries.”(36)
Professor Muir explained that the fiduciary’s duty of loyalty derives
from trust law – an obligation to put the interests of the participants
and beneficiaries first, before that of the fiduciary. Its focus is not on
the outcome, but the process. If the fiduciary is operating under a
conflict of interest, it should minimize its effect.
While the conflict of interest can be minimized in the
annuity selection context, Professor Muir contrasted the conflict of
interest in the claims adjudication context. Where the insurance company
both pays the benefits and makes the decision on benefit eligibility, she
believes the insurer has a very strong incentive to inappropriately deny
claims. Such a conflict of interest could then insulate the insurer from
any real financial risk, especially in light of ERISA’s apparent lack of
remedies for injured participants and beneficiaries. According to
Professor Muir, this is not the case in the annuity selection decision by
a defined contribution sponsor.
There was testimony from Debra Potter who had served as
a broker selling disability insurance products to employers and then
became disabled and filed for disability benefits under her employer’s
plan. Due to her expertise as a broker and her familiarity with the
disability insurance product, she knew what materials to submit to perfect
her claim. However, in her case, the disability insurer moved her case
file through twenty different representatives who frequently lost some of
the documentation. The benefit denials were vague and did not provide any
guidance as to what she could have done to perfect her claim. Only after
she hired an attorney did the insurer settle with her. However, since the
case wasn’t litigated, her attorney fees were not covered, nor did the
insurer pay back interest on the withheld amounts. She recommended some
third party to serve as an advocate in the disability context; this could
be the DOL or the insurance broker.
A. Utility of the SPD
As a result of the testimony heard, the Working Group
concluded that the SPD is no longer accomplishing its original goals (i.e., to be a
summary of the plan and to be easily understood by the
participant). There are a variety of reasons for this result:
-
Case law has held that more favorable interpretation of
benefits as described in the SPD prevails over the unambiguous plan
document(37) and that ambiguities between the SPD and the plan document be
construed in favor of the participant.(38) In response, the SPD language has
become legalistic and omissions, limitations, and reservations are all
listed to mitigate litigation.
-
Complexity of the terms of the plan necessitates the
use of a variety of communication tools, in lieu of a single document (i.e., SPD), to explain benefit plans, not only at the time an employee
becomes a participant, but also at the time of utilization; and
-
Plan sponsors are placing greater reliance on
electronic dissemination of employee communication due to the expense and
limited “shelf life” of hard copy communication vehicles.
To the extent that the SPD is simply a reiteration of
the plan document, it is not accomplishing ERISA’s goals. In questioning
the witnesses for solutions, they recommended various solutions:
-
Use of a one-page summary page or an executive summary
of the SPD that cross-referenced provisions with the SPD;
-
Use of a table of contents and indexes; or
-
A summary that described the plan according various “life
events” (e.g., birth of a child; onset of a serious illness).
Recommendations Regarding the SPD -
There is no “quick fix” solution to this dilemma.
Thus, the Working Group recommends three solutions – two short term
solutions and one long term solution – for the DOL to implement:
Short-Term Recommendation 1: Provide regulatory or
advisory guidance to help plan administrators prepare understandable and
user-friendly SPDs. Affirmation that the use of Executive Summaries or
Life Event Summaries is considered a best practice would be extremely
helpful.
Short-Term Recommendation 2: Enhance or create
mechanisms to enforce the regulatory requirement that SPDs be
understandable by the average plan participant.
Long-Term Recommendation: Review court decisions
granting legal superiority to SPDs and, if necessary, propose legislation
to amend ERISA to restore the original purpose and status of SPDs that
satisfy regulatory requirements.
B. Content of the Notification of Benefit
Determinations
The SPD (or accompanied document) is required to set
forth the plan’s claim procedures. The DOL regulations specify that the
claim procedures not only set forth the rules governing the filing of
claims, but also set forth the time frames afforded to the outcome of
these claims and the process with which an adverse benefit determination
may be reviewed.(39) In the event a participant or beneficiary is denied
payment of benefits under a plan, ERISA §503 affords a reasonable
opportunity for a full and fair review by the appropriate named fiduciary
of the decision denying the claim and requires adequate notice be given to
the participant and beneficiary in writing setting forth the specific
reasons for such denial, written in a manner calculated to be understood
by the participant.
Sponsors provide explanations of benefits (referred to
as EOBs) which either pay or deny the claimant’s benefits and set forth
the reasons for the denial. According to the testimonies, it was not clear
that plan sponsors were specifically setting forth the additional
information necessary to perfect a denied claim, although such requirement
was set forth in the DOL regulations.
The testimonies from the witnesses highlighted a
variety of problems with the current claims procedure regulations:
-
While reputable plan administrators were in compliance
with the current regulations, there was a sense that there was a group of
administrators that were not in compliance, since the requirements were
burdensome and lacked sufficient enforcement penalties. This problem
appears to be more acute in the disability claims context where the
claimant has no intermediary such as a hospital, doctor, HMOs, etc. to
intercede on his/her behalf to assure that benefits will be paid.
-
The respective roles of the plan sponsor, plan
administrator, and if applicable, TPA/insurer, were not explicitly
explained in the context of claims adjudication. The fiduciary
responsibility associated with those roles was also not explicitly
explained and the conferment of any grants of discretionary authority to
the claims adjudicator was not being disclosed.
-
There is no required disclosure as to whether the
claims adjudicator is operating under a conflict of interest. As the
conflict of interest impacts the applicable judicial standard of review,
it is of relevance to any participant’s subsequent cause of action for
claims denial. However, guidance is needed from the DOL to identify
conflicts of interest in this context.
-
Certain TPAs are denying their fiduciary status with
respect to the initial determination of benefits on the premise that the
plan administrator is the final arbitrator of benefits under the plan.
-
Certain TPAs are making initial determination of
benefits without access to the SPD, SMM, and the plan document (including
amendments).
To assure that participants and beneficiaries are able
to process their claims in a timely and fair process, the Working Group
recommends that the DOL, through regulatory or advisory guidance,
implement the following solutions:
Recommendation 1: Require disclosure of the specific
functions of the plan sponsor, the plan administrator, and, if applicable,
the TPA/insurer relating to the claims adjudication process, along with
the fiduciary responsibility associated with each of the various functions
and the conferment of any grants of discretionary authority to the claims
adjudicator with respect to determining eligibility and/or the terms of
the plan.
Recommendation 2: Require disclosure of any conflicts
of interest on the part of the claims adjudicator; however, DOL guidance
is needed to identify conflicts of interest in this context.
Recommendation 3: Affirm fiduciary status for TPAs, who
have been and are continuing to deny fiduciary status with respect to
their initial determination of benefits, on the premise that the plan
administrator is the final arbitrator of benefits under the plan.
Recommendation 4: Require that TPAs retain copies of
the SPDs, SMMs and the plan document, including all amendments, for the
time period required under ERISA.
Summary of Testimony of Michael Tomasek, a partner at
the law firm of Schiff Hardin in Chicago, IL, July 7, 2005
Mr. Tomasek assists clients with developing all types
of employee benefit plans and counsels clients in the resolution of
complex legal issues relating to employee benefit plans. He has special
expertise in the compliance with HIPAA, the Mental Health Parity Act, the
Newborns and Mothers Health Protection Act of 1996, and the Women's Health
and Cancer Rights Protection Act of 1998.
Contents of SPD -
With respect to the SPD, Mr. Tomasek proposed that the
SPD for H&W plans consist of a one page summary, which
cross-references the various provisions of the SPD.
Mr. Tomasek proposed that the DOL should encourage or
require plan sponsors to conduct initial and periodic training sessions (e.g., when the plan is materially modified) for employees, covering the
items in the one page summary. Such training sessions would be
beneficial because participants simply don't read the documents that are
provided to them. When asked to address the participant’s
self-responsibility for reading the documents, Mr. Tomasek agreed that
there is an individual responsibility on the part of an employee to
understand the terms of their benefits, but that it would be easier for
the participant to carry out this responsibility with some assistance from
the employer or other appropriate party. Even if the documents are written
in language that is simple and understandable to the average participant,
there is something to be gained from sitting the individual participant
down and explaining the information.
Information on Form 5500 -
From the participant's perspective, Mr. Tomasek
commented that it may be appropriate to include information regarding the
rating of any plan insurer and the extent to which a state agency would
guarantee payments if the insurer became insolvent. In the case of a
self-insured H&W plan, it may be appropriate to include information
that could indicate financial distress of a plan sponsor (e.g., if the
plan sponsor is currently in bankruptcy). Other potential items could
include events similar to those enumerated under the PBGC reportable
events regulations, including the inability to pay benefits when due,
liquidation, loan default, and similar events.
SAR Format -
For an insured H&W plan, Mr. Tomasek proposed that
the SAR be required to provide relevant information when the plan sponsor
is in financial distress as well as adding whether there is stop loss
coverage in place with respect to the plan and the terms of that coverage.
Because stop-loss coverage only protects the employer
and claims against stop-loss coverage cannot be brought directly by
participants, Working Group members questioned if including stop-loss
coverage information could be misleading to a participant in a self insured
plan. Mr. Tomasek responded that it could be helpful if the employee
believes the employer may be in a situation where it cannot fund benefits,
because the employee would know that there is insurance in place to assist
with certain large claims. It could also be helpful to the participant to
understand the overall financial picture of the plan and the employer
sponsoring the plan.
For an insured H&W plan, Mr. Tomasek commented that
it would be appropriate to add information regarding the insurance
company's rating as well as information on any state agency guaranteeing
payment of benefits if the insurer becomes insolvent. In response to
questions, Mr. Tomasek stated that ratings information would be helpful
because it helps the average person determine the financial condition of
the insurance company. The Working Group members voiced concerns with the
subjective nature of insurance company ratings. Mr. Tomasek also noted
that it would be necessary for the SAR to explain the nature of the
ratings.
Notices in Addition to SPD and SAR -
Mr. Tomasek did not suggest any additions to the
various notices required by ERISA in addition to the SPD and the SAR. He
did note, however, that, to the extent feasible, the DOL should provide
sample language for each required notice that a plan could tailor to its
specific requirements, with the sample language reviewed and updated as
necessary for statutory or regulatory changes.
Format of Notification of Benefit of Determination -
Mr. Tomasek testified that it would be helpful for the
notification of benefit determination to be organized into four sections:
-
The "Notice of and Reasons for Denial"
section, which should clearly state that the claim is denied, in whole or
in part, and clearly identify the plan provisions requiring the denial;
-
The "Information Regarding Your Claim
Decision" section, which should identify the person or entity
responsible for making the claim decision by name and address and should
state that a copy of the information relied upon by the claim decider is
available upon request;
-
The "How to Appeal" section, which should
contain the name and address of the party responsible for considering the
appeal of the denied claim and instruct a participant to set forth in
writing the reasons why the participant thinks the claim should not have
been denied; and
-
The "Your Right to Sue" section, which should
advise the participant of the right to file a suit in the event that the
claim remains denied upon exhaustion of the appeal process, of the
immediate right to sue if the plan fails to comply with the claims
procedures set forth in the SPD, and of the standard of review the plan
administrator intends to be applicable to the claim denial.
Mr. Tomasek stated that information about the standard
of review may be helpful to the participant, or to someone assisting the
participant with the claim denial and review. However, he also added that
this information would only be helpful to the participant if it included
an explanation of the applicable standard. The Notification would also
have to disclose that the standard of review would ultimately be
determined by the court. Finally, Mr. Tomasek commented that it would be
in the employees’ interest for the employer to consider this issue and
to establish the intended standard of review in the Notification.
Effectiveness of Disclosure Requirements for Benefit
Denials -
Mr. Tomasek’s experience is that the claims procedure
regulations are not accomplishing the goals of encouraging an effective
disclosure of the rationale for denial of benefits, the process and access
to information for appealing the denial, and the perfecting of an ERISA
cause of action for denial of benefit claims. For example, he is aware of
instances where the denial notice provides little information other than a
statement that "Your claim is denied based on the terms of your
employer's plan." Mr. Tomasek testified that the DOL needs to
investigate noncompliance and needs to increase enforcement.
Explanation of Insurance Relationship -
In identifying the roles played by entities with
respect to a fully insured plan, Mr. Tomasek noted that the entity
responsible for deciding claims is the insurer, to which authority is
delegated by the plan sponsor under the terms of the insurance contract.
Mr. Tomasek also responded to a question regarding
fiduciary status by noting that, in an insured context, if the insurer is
responsible for deciding claims, the insurer is the fiduciary in that
context, whereas the plan administrator is the fiduciary in the
self-insured context. If the employer delegates the authority to decide
claims to a TPA (e.g., an insurer providing only administrative services),
the third party is the fiduciary with respect to claim determinations.
Finally, whenever any fiduciary is making claims decisions, the fiduciary
is required to act with undivided loyalty to the plan and all of its
participants. Any conflict of interest between the plan sponsor and the
plan (including all plan participants) must be resolved in favor of the
plan.
Summary of Testimony of Mark DeBofsky, a partner at the
law firm of Daley, DeBofsky & Bryant of Chicago, IL, July 7, 2005
Mark DeBofsky specializes in civil & appellate
litigation, concentrating in employee benefit litigation and representing
claimants rather than plans. He is a graduate of the University of
Illinois College of Law; member of the ABA Tort & Insurance Practice
Section and Employee Benefits Committee; and co-chair of the Employment
Discrimination Subcommittee.
Mr. DeBofsky began his testimony with a review of the
1989 Supreme Court decision of Firestone v. Bruch which permits courts to
apply a deferential judicial standard of review – the arbitrary and
capricious standard. Mr. DeBofsky stated that statistics show that the
insurer/plan wins over 75% of the time. On a de novo standard of review,
claimant will win approximately 60% of the time. Employees have the right
to know if the plan is reserving discretion because it will affect their
confidence that their plan will pay a claim that is incurred.
Mr. DeBofsky indicated that if there is no plan and no
delegation, that the insurance company has no independent authority to
give them discretion under the terms of ERISA. Thus, they should be held
liable under a de novo standard of review, rather than an arbitrary and
capricious standard of review which substantially enhances the likelihood
that the claim denial would be upheld by a court. Quoting Mr. DeBofsky
from the record, “[o]n a de novo standard of review, the claimant stands
in an equal position with the insurance company. If the judge is persuaded
that the evidence the claimant presents is more persuasive, the claimant
wins. But in a deferential arbitrary and capricious standard of review,
the claimant could come in with ten medical reports supporting their
disability. And the plan could have one report written by a doctor who has
never seen the claimant and still win the case.”
The courts have faced over 200 federal appellate
decisions on the issue of what plan language triggers the arbitrary and
capricious standard of review. Mr. DeBofsky referred to Judge Posner
remarks from Herzberger v. Standard Life Insurance Co., 205 F.3d 327
(7th
Cir. 2000) that solid entitlement to benefits depends on the language in
the plan. In Herzberger, the 7th Circuit prescribed model language that
could be used to create a deferential standard of proof, yet hardly any
plans have incorporated that language, which means litigation over what
language is sufficient, continues to the present day. When asked to
paraphrase Herzberger’s model language, Mr. DeBofsky indicated that the term “discretion”
or equivalent synonym is required; otherwise the language is ambiguous. He
thought there should be additional language beyond the language the
Seventh Circuit prescribed in Herzberger so that an insured would know
what was their level of protection. Mr. DeBofsky recommended that the DOL
issue a regulation setting forth model discretionary language if a plan
has the intent of reserving it (for example: the plan has conferred
discretionary authority upon the plan administrator or TPA in determining
eligibility for benefits and/or construing the terms of the plan and thus,
the courts will use a highly deferential standard of review in judging a
claims denial).
In response to a question as to what steps a claimant
could take in advance to protect his/her rights, Mr. DeBofsky indicated
that backup or supplemental coverage could be purchased. When questioned
about the feasibility of such back-up coverage because many insurers won’t
go over 60 or 70%, Mr. DeBofsky answered that there still was a benefit to
disclose. Member Gladstein indicated in the Union sector, if this was in
the SPD, they could file a grievance saying that the plan the company
bought isn’t in compliance with what was negotiated or request a better
plan in the next round of negotiations. Panel Members debated what the
employee could do with this information.
Mr. DeBofsky was posed the question: if a plan sponsor
is entering into an insurance contract in which the insurer has granted
itself full discretion to determine claims, is that a sufficient
delegation from the sponsor to the insurer? Mr. DeBofsky indicated that in
the 7th Circuit there is an implied belief that there is an overriding
plan document that establishes a disability or health benefit plan and
then within the scope of that overriding plan, there is the purchase of
insurance. He stated that unless the fiduciary act is actually performed
by somebody who has been told that they have that discretion and a plan
instrument, then the court should not be granting discretion as a matter
of course just because it says so on the insurance policy. There is a step
missing. The policy lacks a bridge from the reservation of discretion in
the first instance to the discretionary act, which is going to be accorded
an arbitrary and capricious standard of review in the courts.
Mr. DeBofsky testified that disability insurers are
giving themselves discretion to decide who receives benefits or equivalent
language. This is not what ERISA contemplates in the statute - 29 U.S.C.
§§1102 and 1105(c) which speak of a written instrument delegating that
discretion. If an insurance company merely takes that discretion upon
themselves, the point of ERISA as set forth in the statute is missed. Most
federal courts have not picked up on this point.
If the insurer is making a discretionary decision, a
member of the Working Group stated that it is taking on a fiduciary role.
Why then isn’t the insurer a proper party in any litigation over a
claims denial? Mr. DeBofsky responded that the courts are saying that the
only proper party is the plan itself, but the plan itself is nothing but a
piece of paper. However, it’s the insurer who is making the decision,
but courts are dismissing them from these cases. He indicated that the
insurance companies are writing these policies with a few pages at the end
labeled “Summary Plan Description” or an ERISA statement that says “Plan
Sponsor, ABC Company” “Plan Administrator, ABC Company”, it doesn’t
list the insurance company as having the authority.
When asked how this issue is relevant to the topics at
hand, Mr. DeBofsky answered that the party responsible for making the
claim decision should be named in the documents that the plan participants
are provided. If the plan sponsor just uses the insurer as the TPA, the
plan sponsor would be responsible. If the insurance company was the party
making the decision and its funds are at stake, there should be a means of
keeping that company in the case.
In many companies, group insurance benefits are
mandatory and everyone has to be enrolled in the plan, but employers are
not given the option of a discretionary policy or non-discretionary
policy. What they are buying is concealed from the employers as well
because they have no explanation as to what the benefit plan provides.
What is going to happen if a claim is denied and the claim ends up in
court?
Members discussed with Mr. DeBofsky as to why it would
be better for the employee to know that they are not as well protected as
they may think. His response was that most people would be willing to pay
more money for an insurance plan that is actually going to protect them
than pay less for a plan that offers little or no protection unless they
suffer catastrophic disability confining them to a wheelchair or hospital
bed. He was not saying that insurance companies are habitually providing
illusory benefits and defrauding the people that contribute to the plan,
but points out that the largest disability insurer in the country UNUM
Provident Corp. was just cited by the DOL for systematically engaging in
unfair claims practices which resulted in the unfair denial of benefits,
paid a $15 million dollar fine and will be reviewing over 215,000 claims.
He stated that everything that exists in the ERISA law creates the
perverse incentive to deny claims because there’s no practical
consequence for that.
On the state insurance law level, the National
Association of Insurance Commissioners promulgated a model law prohibiting
discretionary clauses in health and disability policies. Mr. DeBofsky
explained how various states can enact a model law promulgated by the NAIC.
So far, only California, Montana and Illinois have taken action, but in
forty seven states, it is perfectly permissible to include discretionary
clauses.
There has also been litigation as to whether the
discretionary language that is in the certificate of coverage (but not in
the plan or in the summary plan description) is sufficient to trigger a
discretionary standard of review. Mr. DeBofsky stated that the Seventh
Circuit recently ruled that the certificate, the SPD, and the plan are all
plan documents and thus, if the discretionary language is found in any one
of them, that is sufficient. Other courts hold to the contrary, requiring
the discretion to be in the plan.
There was a discussion between the members and Mr.
DeBofsky as to the liability of brokers who sell these policies to
employers. Mr. DeBofsky asserted that the brokers don’t understand what
they are selling and don’t understand the legal significance of the
particular clauses in the contract (e.g., discretionary clauses). However,
he cited a Montana Supreme Court decision Dionier vs. Paul Revere Life
Insurance Company, where a broker sued the insurer because she felt she
was misinformed about the significance of certain policy language and how
it would be used in litigation.
The members questioned whether discretionary clauses
could be adequately explained to participants. Mr. DeBofsky said yes. Step
one is communicating the appropriate discretionary language if the plan is
going to confer discretion and step two is to communicate the legal
significance as to how language relates to the claims adjudication. What
is important is for employees to understand the benefits they’re being
given. Mr. DeBofsky indicated that the point of employee benefits is to
recruit and retain the best employees they can find. If the benefit plan
is illusory, the employees won’t be happy with that coverage and they
could use bargaining power to get a better benefit program. If necessary,
employees may have to get the attention of employer’s executives.
A member of the Working Group noted that employee
benefits are voluntary and it’s important to balance this against any
demands imposed on the employers in providing benefits. Mr. DeBofsky
agreed that employers should be encouraged to offer the benefits, but the
benefits should have real meaning and offer the protection that they
purport to have. He has been trying to get statistics about whether you
could buy a discretionary policy versus a non-discretionary policy and
what the price difference would be.
Summary of Testimony of Helen Darling, the President of
the National Business Group on Health, a national non-profit organization
devoted to providing practical solutions to employers on health care
issues and representing employers’ perspective on national health policy
issues, July 7, 2005
Ms. Darling testified that the National Business Group
on Health, is a membership organization of large employers and they work
only with H&W plans. This organization wants increased transparency
for health care consumers across the board in everything that anybody
could possibly know and things they are not able to know but should.
The witness went on to say that the plan documents and
the programs that are available to employees should absolutely spell out
in simple lay language the options they have. Informed decision-making
and tools that help people to understand what, in fact, makes sense to
them on an evidence basis ought to always be a key part of anybody's
health plan.
She also stated that employers want employees to be
well informed so they can make good choices. They know that a well-informed
employee who makes good health care decisions will value their benefits
more, that they will have fewer administrative problems and can often
contribute to reducing the cost of both health benefits administration and
health care costs.
Ms. Darling said that those of us who are either large
employers or work with large employers know that people have to understand
the value of their benefits. And everybody agrees that communication is
key. She believes that most employers do, in fact, spend a lot of time and
money on communication to employees. The witness referenced a recent study
by Watson Wyatt in February 2005. The study found, among other things,
that employers can significantly improve retention rates by communicating
details about health benefits to employees.
Ms. Darling stated that the best companies and best
practices use multiple lines of communication. They use a variety of tools
-- posters and pop ups on the employees’ computer during open enrollment
time. Also dedicated call centers, face-to-face meetings, post cards,
inserts into payroll mailings, CDs, videos and newsletters are used by
companies trying to communicate to their employees. Ms. Darling said that
SPD requirements are extremely complex, but for the most part, they work.
What they would not want to see is anything more burdensome than the
current requirements.
Summary of Testimony of Nicole Melton, Senior Vice
President and Practice Leader of Organizational Communication in AON
Consulting’s New York City office, who works with mid- to large-size
clients designing and implementing communication strategies to support
human resource and organization change of varying degrees, July 7, 2005
Ms. Melton’s comments focused on two primary areas
related to SPDs for H&W plans: (1) SPD content; and (2) SPD logistics.
Ms. Melton stated that the content in SPDs is a barrier to consumerism.
Employees are asked to take control and be accountable for their benefit
decisions but the SPD does not provide them the accessible, plain language
information they need and want. Since recent rulings have decided in favor
of the SPD when there is a conflict between the SPD and the plan document,
employers are faced with the burden of balancing the employees’ need for
understandable information and the employer’s need to mitigate risk
while meeting ERISA standards. Unfortunately, these two objectives are
mutually exclusive.
With respect to logistics, employers struggle with
budget allocations for SPDs - development of the format and content,
production and distribution. Ms. Melton discussed the complexity involved
in drafting an SPD for H&W plans. She referenced the forty-seven page
checklist that AON Consulting developed for its communication consultants
to use when drafting an SPD. The checklist is used to identify information
that should be included in an SPD prepared for an ERISA Plan. There is a
sixteen-page checklist that addresses administrative issues, eligibility,
participation, contributions, benefits, loss of benefits, disclaimers and
rights under COBRA and HIPAA. This is information that is either required
to be in the SPD by DOL regulations or recommended for clarification
purposes. Then there are twenty pages of model language and notices and
finally three pages of additional information. Not only is there
complexity in the language required but the cost to develop, produce and
distribute can be significant, especially for large employers. In
addition, some employers are not in compliance because they are not fully
aware of all of their compliance obligations. Therefore, they do not
produce and distribute within the compulsory time frames. Even electronic
distribution has problems because some employee populations have no PC
access at work.
Ms. Melton’s suggestions for improvement focused
around keeping the communication “real” and returning to basics. She
said we should not lose sight of the primary purpose of an SPD which
should be easy to understand H&W plan provisions, coverages and
exclusions. She suggested that with respect to the content of an SPD, the
language should be consistent with the tone used in open enrollment
materials. It should have an introductory section that is brief and
includes information of interest to the employee and a listing of other
resources for the employee to access like web sites, hotlines or insurance
carrier information sites. Ms. Melton suggested that we consider a
recommendation to the DOL to provide representative wording that
employers, carriers, consultants and others could use in drafting SPDs.
With respect to logistics, she cited the need to make production and
distribution easier, especially by allowing for other media forms besides
hardcopy (e.g., web sites, CD-ROM’s, etc.).
Summary of Testimony of Dr. Steven Sleigh and Dr. David
Lansky; Dr. Sleigh is Director of Strategic Resources for the
International Association of Machinists and Aerospace Workers (IAM), and
Dr. Lansky is the Director of the Health Program at the Markle Foundation
which is a proponent of a more responsive and accountable health care
system, July 7, 2005
Dr. Sleigh testified that health care is a difficult
issue in collective bargaining. Management is struggling to maintain
health benefits and their competitiveness, while the IAM is trying to get
the best coverage at the best price for its members. He said that over
half of their strikes are related to health care cost shifting.
Dr. Sleigh stated that the SPD and other plan
communications need to explain what employees get for their money under a
plan. He criticized SPDs for being written for health care professionals;
not for everyday people. He feels that SPDs are very difficult to
understand. Dr. Sleigh argued that SPDs and other health plan
communications should be written to the level of the people who are using
the benefits even though they are legal documents. In his written
Testimony, Dr. Sleigh recommended that SPDs be provided to participants at
least once every three years.
Dr. Lansky testified that his research shows that
people want information about quality to assist them in making medical
decisions, and they want information that allows them to be better
managers of their families’ health care. He pointed out that Medicare,
the largest plan sponsor in the country, is creating an online portal to
allow beneficiaries to look at their own claims data. He stated that there
are also discussions to create a system under the new prescription drug
program that will enable Medicare participants to review on-line their
medication list and their medication history. Under this scenario,
Medicare would aggregate information from its contracting providers and
then make it available to participants electronically. Dr. Lansky noted
that although this has not yet been finalized, it shows that a very large
complex organization with public responsibility is looking into this idea.
Dr. Lansky stated that there are four categories of
information that people want to have but they are not getting from their
SPD. They want to know how to choose a doctor. They want to understand
what their doctors are telling them. They want to know if their doctors
are paying attention to best practices and standards of care. They want
transparency since they believe plans have hidden incentives to health
care providers that affect medical decisions, impact the quality of care,
and shift costs to participants. Dr. Lansky, Dr. Sleigh and the Working
Group members discussed issues related to the gaps in the information that
is collected, problems with ways the data is collected, and difficulty in
getting access to the data.
Dr. Lansky talked about personal health care records.
He and Dr. Sleigh discussed how ERISA applies to this type of information
and what the Working Group could advocate if it agreed that this type of
information should be recommended or required. For example, there was a
discussion about claims data, including who owns the claims data and who
has access to the data.
Dr. Sleigh argued that the SPD is not currently an
effective tool and is not adequate given today’s technology. He said
that since ERISA governs communications to plan participants, there should
be a way to say that it is in the participants’ interest to have access
to this type of information. He gave an example of how using electronic
technology workers should be able to look at a simple-to-read SPD for
information about benefits under the health plan, with links to a listing
of doctors in the network, information on quality, and their personal
health records.
Dr. Sleigh talked about the burden and difficulties if
this type of information was mandated, but said that access to this
information would save lives and reduce costs. He feels that the Secretary
of Labor should come out in favor of an open, transparent health care
system, and that available information should be provided through the SPD.
He stated that he does not want ERISA to force the entire country to
change overnight, but that the SPD needs to reflect the best information
that is available.
Summary of Testimony of Marty Webb, Assistant Vice
President of Benefits Operations for SBC Communications, who has
responsibility for all H&W and retirement benefit operations for SBC
Communications, September 21, 2005
Marty R. Webb addressed the effectiveness of ERISA
guidelines on H&W communications. He provided the Council with
background information on the state of the healthcare industry in the
U.S., with escalating health care costs exceeding inflation. He focused on
the employer’s role in a healthcare system consisting of employers,
consumers, providers, administrators/insurers and the government. With
cash expenditures for H&W plans rising, employers are focusing on plan
design. Employee communications about that design is a fundamental
requirement because for a plan to be effective, participants must
understand the provisions.
Mr. Webb addressed the evolution of SPD language and
the use of SPDs. He stated that a vast array of communication tools are
now used and do a better job than SPDs of explaining the benefits, by
using more manageable bites of information delivered at teachable moments.
The DOL regulations require that the SPD be written in
a manner calculated to be understood by the average participant -- a
difficult order to fill. When an SPD, which must explain complex plan
provisions, is written following ERISA and DOL guidelines and drafted to
mitigate litigation risk, the resulting communication is often ineffective
in explaining the plan to participants. Town hall sessions, online
information, plain speak benefit updates, web-based tools, Webinars and
annual open enrollment materials are forms of benefit communications that
provide more understandable information for participants.
Since SPDs continue to play an important role in
documenting plan information, Mr. Webb did not recommend restricting their
distribution. He suggested that the SPD, coupled with enhanced technology
and improved communication practices and procedures, be considered in
determining guidelines. SBC is not recommending changes in the format or
disclosure requirements for SPDs, SMMs, SARs, COBRA notices, etc. SBC is
recommending that plan administrators be allowed to satisfy the
requirement for legally required communications through notices of
availability in electronic or paper form at the time a document is
required to be distributed (i.e., apprise the participant of the
significance of the document and its availability upon the participant’s
request). The current required communication documents, like SPDs, SMMs,
SARs, are needed but there should be alternate means of satisfying the
distribution requirements.
Summary of Testimony of Paul Boulis, Senior Vice
President of the National, Government and Labor Divisions of Blue Cross
Blue Shield of Illinois, who is responsible for over 300 major and
national clients, most of whom are administrative service (not insured)
clients, September 21, 2005
Mr. Paul Boulis testified that Blue Cross and Blue
Shield of Illinois (“BCBSIL”), a division of Health Care Service
Corporation (“HCSC”), a Mutual Legal Reserve Company, is the largest
health insurance company in Illinois. It provides 6.5 million people with
coverage through a variety of health plans for individuals, labor
organizations and employers. Much of BCBSIL’s business is focused on
employers who provide group health plans for their employees and who are
regulated by the DOL under the provisions of the ERISA.
BCBSIL does not serve as the plan administrator or the
plan sponsor of the employers’ separate H&W plans, and therefore
does not undertake direct ERISA compliance responsibility assigned to the
plan administrators. BCBSIL does not prepare ERISA required documents such
as the SPD and does not review any materials produced by covered
employers. Because of the limited scope of its responsibilities, BCBSIL’s
knowledge of how effectively ERISA required information is communicated to
group plan participants is both limited and indirect.
Based on BCBSIL’ experience with approximately 24
million phone calls received annually from participants with questions
about their plan benefits, BCBSIL believes that some plan participants
understand some of their benefits some of the time. Communication tools
that overwhelm participants with information might not provide answers to
their most important and urgent questions. Much of the confusion exhibited
by plan participants is due to the overwhelming complexity of health plan
designs. The disclosure document needed to fully explain the health plan
design is lengthy and many plan participants do not have the time to read
and study it. In addition, BCBSIL believes that a certain population
responds better to personal explanations. Finally, when individuals are
under stress due to a personal or family health issue, they want answers
quickly.
The current variety of health plan designs introduces a
new vocabulary of terms, such as HSA, HRA and FSA, and also requires plan
participants to be more informed about their health plan benefits than
ever before. BCBSIL’s customers must now provide even more detailed
information to participants, well beyond what is required by ERISA. For
example, a health plan membership card is no longer simple. Many large
group customers contract separately for the administration of different
benefits and features contained in their plans, resulting in four or five
different customer service phone numbers on the back of the cards.
ERISA became law in a much simpler time. The materials
that are distributed to plan participants under the requirements of ERISA
do not, and in fact cannot, easily provide all the answers to all the
possible benefits questions. And, it might be impossible to make all of
the details of health plans simple enough to be readily understood by most
plan participants.
Changes to ERISA requirements alone will not meet all
the challenges or answer all of the questions as individuals use their
increasingly complex benefits. There will always be a need for a variety
of information vehicles to help health plan participants fully understand
their benefits and other aspects of their plan, including well-trained
customer service representatives, intuitive, interactive Internet-based
tools and clear, effective ERISA required communication materials. It
would be very, very hard for ERISA requirements to identify every one of
the possible permutations in a typical plan design and make sure they're
covered.
Summary of Testimony of Mary Ellen Signorille, Senior
Attorney in the AARP Foundation Litigation, September 21, 2005
Mary Ellen Signorille discussed that the people AARP
assists often have trouble understanding the explanation of benefits (EOB)
which is supposed to inform them as to why their claims were denied. When
they question the TPA, it typically does not have a copy of the plan or
the SPD. TPAs should be able to answer questions about why benefits are
being denied and what the participants need to do to support their claims.
Concerning the DOL claims regulations, Ms. Signorille
thinks it is working better at health plans than at disability plans. In
response to a question, she said that there should be separate claims
regulations for health versus disability plans. She finds for disability
claims that insurers are not providing the claims manuals, documents, and
claims file. Ms. Signorille mentioned a recent case out of the First
Circuit which basically said that until a participant can prove prejudice,
they don't have a right to the file. She argued that this puts the cart
before the horse since an individual does not know if there is something
of prejudice if they have not yet seen the file. Ms. Signorille feels that
this ruling is not in line with what the Department intended in its claims
regulation, and that this could lead to a patchwork of interpretations of
the claims regulation.
Ms. Signorille also stated that participants do not
understand the meaning of the discretionary clause and how it can impact
their claims. She suggested that the DOL issue model language based on the
court cases as to the meaning of a discretionary clause and its impact on
the court’s review of a participant’s claims denial. In addition,
model language on exhaustion of the claims procedure would be useful since
people often do not submit everything that they could to support their
claim and do not realize that they may not be able to submit more
information later. Ms. Signorille mentioned that most participants do not
understand that they need to give a point-by-point explanation and
refutation of what the plan's doctors have found. She feels that this has
become even more important as some courts have determined that when a plan
has a discretionary clause, all they need is substantial evidence, which
is not a lot of evidence. Ms. Signorille said that insurers often close
the record and do not allow relevant information in the review.
Another area of confusion that Ms. Signorille mentioned
is that health and disability plans have limitations, such as number of
treatments or months of benefits. She feels that participants do not
always understand these limits nor do they understand why the sponsor
changed the limits (e.g., increase in premiums due to rising health care
costs). Reservation of rights clauses was another part of the SPD that Ms.
Signorille thinks participants do not understand. Participants do not
understand the relationship between employer-provided health care, COBRA
and Medicare, which is sometime the SPD could clearly explain. Lastly,
mergers and acquisitions was an area that creates confusion for
participants. She thinks that plans should provide a notice explaining how
a merger or acquisition will impact their benefit plans.
Members of the Working Group and Ms. Signorille
discussed SPDs, including people not reading them and how do you highlight
key issues without having the document overwhelmed by bold print. Ms.
Signorille said that a SPD really has two parts. One is benefits. The
other is participant rights. She recommended the SPD have a table of
contents and indexes.
Concerning fiduciary duty, Ms. Signorille thinks there
is a big problem in knowing who has responsibility under disability plans
when there is a plan administrator, an employer and an insurer. She said
employers get frustrated since they think the insurance companies are
handling things, but the insurer say the employer is the fiduciary and the
circuits are not in agreement as to who is a fiduciary in this context.
Ms. Signorille also provided a written submission
providing more details on AARP’s concerns. Proposals related to Form
5500s included having the Department of Labor consider different Form
5500s for health and pension plans; having the entities or individuals
responsible for compliance with ERISA attest to the information provided
on the Form 5500; adding questions about recent changes in attorneys,
actuaries, or other service providers; and having all current fiduciaries
identified.
Concerning the use of SPDs in court, AARP recommended
that the legal standard of reliance on the SPD be interpreted in favor of
a participant-friendly approach to encourage greater clarity instead of
having an extremely high threshold which requires the participant to show
detrimental reliance on the SPD.
Other proposals included allowing participants, upon
written request, to get a list of employers contributing to a
multi-employer plan; shortening the time limit for plan administrators to
provide SMMs; plan amendments should not become final until at least
thirty days after participants have been given notice; and SARs need to
include additional information, such as were salary deductions paid to the
insurer or if the plan is self-insured.
The written submission also included more details, such
as court cases and legal issues, on topics Ms. Signorille testified about,
such as EOBs, claims procedures and manuals, and participant access to
their case files. It also touched on concerns such as plans seeking
financial records on participants that have no relationship to a
participant’s claims; participants having trouble getting historical
plan documents that are related to their claims; issues related to
electronic notices; the need for penalties for failures to provide
information; and problems non-English speakers have in getting assistance
from their plans.
Summary of Testimony of Andrew Bernstein, Vice
President and General Counsel of Disability RMS, Inc., Worksite Specialty
Partners and CORE, Inc., which are wholly-owned subsidiaries of Assurant,
Inc., providing disability insurance and administration for ERISA covered
plans, September 21, 2005
Mr. Bernstein testified it’s important to understand,
when you’re talking about ERISA claims and ERISA plans in the insurance
context, that you have a little bit of context. His employer is a TPA, and
as a TPA, it prices, underwrites, and handles claims for a number of
companies. In its capacity, it is a claims fiduciary. The TPA makes claims
decisions, and it makes appeal decisions. Even if it was not making the
final appeals decision, it considers itself the claim fiduciary, which
means it is a fiduciary to the extent of its claims responsibility. Mr.
Bernstein noted that one area of confusion has been for plan participants
in understanding the difference between a TPA and a plan administrator.
Mr. Bernstein referenced the requirement that the
denial letter or adverse benefit determination is required to refer to the
relevant plan provisions. He indicated that this should be more than a
just a reference, but instead the exact plan provisions should be quoted.
Insurance policies are sometimes difficult to read, even though state laws
require that they pass this “Flesch” test (e.g., plain language).
He also stated for disability claims there’s a reason
for the DOL regulations to be clarified – to be more specific in setting
forth what the content of the adverse benefit determination letter should
be, so that there is a better understanding on the part of the insured as
to what is needed to perfect the claim.
Mr. Bernstein made several suggestions including: the
issuance by the DOL, clarifying the regulation or through interpretative
guidance, that discretionary authority is acceptable language in ERISA
governed insured plans; clarification as to the difference between the
plan administrator and the TPA; and clarification for participants in
terms of how insurers relate to plans, plan sponsors and plan
administrators.
Mr. Bernstein testified that small employers have a
difficult time with the rules and requirements of the SPDs. They often
look to the insurance policy as the plan documents and the certificates of
coverage issued by the insurer as the SPD, adding on the appeal claim
language (which most insurers certificates do).
Summary of Testimony of Jacqueline Paul, Corporate
Director of legislative policy and research at Humana, who is responsible
for compliance with federal and state claim determinations and
internal/external dispute resolution mechanisms. She testified on behalf
of Humana and America’s Health Insurance Plans (AHIP), September 21, 2005
Ms. Paul said that Humana Inc. has about seven million
health plan members in individual arrangements, employer sponsored plans
and government sponsored plans. In 2004, Humana Inc. processed about 31
million claims in these plans and arrangements. She testified that
administration and communication of the claims and appeals rules for
insured group health plans is complex because of dual regulation. Insured
plans are subject to both federal and state regulation. ERISA preempts
state laws that relate to claims and appeals processes for insured plans
only to the extent such state laws prevent the application of the federal
rules. This leads to complexity and confusion.
Many insurers also voluntarily pursue accreditation for
its practices and procedures through organizations like the National
Committee for Quality Assurance and the Utilization Review Accreditation
Commission. Satisfaction of such accreditation can add to the existing
complexity of the dual state and federal regulation of the claims and
appeals processes. All of these sources address various and overlapping
aspects of the claims and appeals processes. This can make the
communication and administration of these processes complex. Ms. Paul
testified that there is no significant rationale for why these overlapping
regulatory regimes serve the best interests of consumers. Her testimony
implies that the present set of overlapping regulations is instead
detracting from the best interests of consumers.
Ms. Paul also testified that AHIP membership reported
that implementation of the ERISA claims and appeals regulations for its
insured book of business alongside the multitude of individual state
requirements was “among the most complicated and resource-intensive
process implementations they have undertaken.” She also described the
complex process undertaken by her employer, Humana, to comply with all of
these requirements.
Ms. Paul offered the following recommendations to
improve the claims and appeals process:
-
The ERISA claims and appeals procedures should be the
foundation for these processes in all insured plans, as they naturally are
for self-insured plans. This uniformity would simplify administration
thereby reducing costs.
-
An educational program for state regulators and plan
sponsors is needed to show how federal law is coordinated with state law
for insured group products. The AHIP offered its assistance to the DOL to
develop such a program.
-
Technical clarifications should be made to the ERISA
claims and appeals rules substituting legalistic language for language
understandable by a layperson.
Summary of Testimony of Debra Potter, a 12-year
insurance broker, selling group health, life, disability and pensions
through local and state offices for Health Underwriters’ Association,
prior to contracting Multiple Sclerosis (MS) in 2002. Mrs. Potter was a
participant under an employer-provided disability plan that was
administered by a TPA, September 21, 2005
Mrs. Potter testified that she has been on all sides of
the issue, as she was an insurance broker selling insurance for H&W
plans and an employee covered under a H&W plan. As a broker, she
educated employees about their rights and assisted them in processing
claims. Therefore, when she became ill, she knew what documents to file.
Mrs. Potter was diagnosed with multiple sclerosis (MS) which is difficult
to prove. As her employer was covered under an older disability policy
that didn’t specifically state certain exclusions, most disabilities
were usually covered. Within three months of submitting the documents, she
began to receive benefits. When her condition worsened, her doctor
suggested a second opinion. Shortly after that, she received notice from
the insurance company that the prior payments were a mistake and benefits
would cease.
Off the record, the insurer’s representative told her
that the carrier wouldn’t cover her disability because she made too much
money. Two weeks later, the insurance representative was gone and her case
was switched through twenty different representatives who frequently
claimed to have “lost” documentation. Mrs. Potter had kept copies of
everything but was sick and couldn’t keep up with the carrier’s
requirements. The denials documents were vague and legalistic. As her
condition worsened, she contacted her employer’s senior management.
These senior officials called the insurance carrier demanding the claims
be paid and they couldn’t get through.
Mrs. Potter then hired an attorney and the insurance
company settled. However, it did not pay lost interest on the withheld
payments, nor attorney fees. In the context of disability claims, it would
have been helpful to have a third party advocate, perhaps the broker. She
encouraged the Working Group members to remember that disabled employees
are sick people who are under a lot of stress. Mrs. Potter believes that
insurance companies are overwhelmingly disinclined to pay valid claims.
She believes insurance companies will pay smaller claims, but fight harder
when the claimant is paid a higher salary. The insurer’s goal was to see
whether the claimant could survive the continuous levels of denials.
Mrs. Potter stated that her claims denial did not
specify what information she should submit in order to perfect her claim.
She also didn’t know at what point in the process to hire an attorney.
Professor Dana M. Muir, a professor of the Ross School
of Business at the University of Michigan, testified before the Working
Group on Retirement Plan Distributions & Options on September 22,
2005, on the topic of selection of annuity providers in defined
contribution plans. One of the issues that she testified on was the DOL’s
formulation of a fiduciary’s duty of loyalty in the context of selecting
annuity providers for its participants and beneficiaries. ERISA does not
prohibit a plan fiduciary from having a conflict of interest; instead,
ERISA’s duty of loyalty requires the plan fiduciary operating under a
conflict of interest to mitigate against such conflict. In this regard,
Professor Muir recommended that the DOL reconsider its interpretation of
the fiduciary’s duty of loyalty, set forth in Interpretative Bulletin
95-1 (IB 95-1).
In that bulletin, the DOL stated that, in the context
of selecting an annuity provider, the fiduciary’s duty of loyalty
required it to “take steps calculated to obtain the safest annuity
available, unless under the circumstances it would be in the interests of
the participants and beneficiaries to do otherwise.” Fifth Circuit
opinion, in Bussian v. RJR Nabisco Inc., 223 F.3d 286, 300 (5th Cir.
2000), rejected the DOL’s interpretation and instead judged the
fiduciary’s decision “with an eye single to the interests of the
participants and beneficiaries.” If the fiduciary kept its focus on the
interests of participants and beneficiaries foremost in its minds, taking
all steps necessary to prevent conflict interests from entering into the
decision-making process, it would satisfy the duty of loyalty.
While the conflict of interest can be minimized in the
annuity selection context, Professor Muir contrasted the conflict of
interest in the claims adjudication context. Where the insurance company
both pays the benefits and makes the decision on benefit eligibility, she
believed that the insurer has a very strong incentive to inappropriately
deny claims. Such a conflict of interest could then insulate the insurer
from any real financial risk, especially in light of ERISA’s apparent
lack of remedies for injured participants and beneficiaries. According to
Professor Muir, this is simply not the case in the annuity selection
decision by a defined contribution sponsor.
Meeting of July 7, 2005
-
Agenda
-
Official Transcript
-
Statement by Donald Michael Tomasek, Schiff Hardin
& Waite
-
Statement by Mark DeBofsky, Daley, DeBofsky &
Bryant
-
Statement by Helen Darling, National Business Group on
Health
-
Statement by Nicole Melton, AON Consulting,
representing Plan Sponsors
-
Statement by Steve Sleigh, International Association of
Machinists & Aerospace Workers
-
Statement by Dr. David Lansky, Markle Foundation
Meeting of September 21, 2005
-
Agenda
-
Official Transcript
-
Statement by Marty Webb, SBC Communications
-
Statement by Paul Boulis, Blue Cross & Blue Shield
of Illinois
-
Statement by Mary Ellen Signorille, AARP
-
Statement by Andrew Bernstein, Disability RMS Inc.
-
Statement by Jacqueline Paul, Humana Inc.
-
ERISA §102(a).
-
DOL Regs. §2520.102-2.
-
ERISA §503(1).
-
ERISA §503(2).
-
DOL Regs. §2520.102-2(s).
-
DOL Regs. §2560.503-1(g)(1)(i)-(iii).
-
DOL Reg. §2560.503-1(g)(1)(iv).
-
DOL Reg. §2560.503-1(g)(1)(v)(A).
-
DOL Reg. §2560.503-1(g)(1)(v)(B).
-
DOL Reg. §2560.503-1(g)(1)(vi)..
-
ERISA §503(2).
-
DOL Reg. §2560.503-1(h)(2)(i).
-
DOL Reg. §2560.503-1(h)(2)(ii).
-
DOL Reg. §2560.503-1(h)(2)(iii).
-
DOL Reg. §2560.503-1(m)(8)(i).
-
DOL Reg. §2560.503-1(m)(8)(ii).
-
DOL Reg. §2560.503-1(m)(8)(iii).
-
DOL Reg. §2560.503-1(m)(8)(iv).
-
DOL Reg. §2560.503-1(h)(2)(iv).
-
489 U.S. 101, 115 (1989).
-
Id. at 112-13.
-
Id.at 111.
-
See Pinto v. Reliance
Standard Life Ins. Co., 214 F.3d 377, 392-93 (3rd Cir.
2000); Pagan v. NYNEX Pension Plan, 52 F.3d 438, 443-44 (2nd
Cir. 1995); Killian v. Healthsource Provident Administrators, 152 F.3d
514, 520 (6th Cir. 1998); Maune v. IBEW, Local #1, Health
& Welfare Fund, 83 F.3d 959, 962-63 (8th Cir. 1996);
Pozzie v. United States Dept. of Housing and Urban Development, 48
F.3d 1026, 1029 (7th Cir. 1995); Kisser v. Cisneros, 14
F.3d 615, 618 (D.C.Cir. 1994); Ershick v. United Missouri Bank, N.A.,
948 F.2d 660, 665-66 (10th Cir. 1991); Brown v. Blue Cross
& Blue Shield of Ala., Inc., 898 F.2d 1556, 1562 (11th
Cir. 1990), cert.denied, 498 U.S. 1040 (1991); Davis v.
Kentucky Fin. Cos. Retirement Plan, 887 F.2d 689, 693 (6th
Cir. 1989), where the court noted that the arbitrary and capricious
standard was the Aleast demanding form of judicial review.@
-
See Pagan, 52 F.3d at 442, citing
Van Boxel v. Journal Co. Employee=s Pension Trust, 836 F.2d 1048, 1049
(7th Cir. 1988); Meditrust Financial Services Corp. v. The
Sterling Chemicals, Inc., 168 F.3d 211, 214 (5th Cir.
1999); Brogan v. Holland, 105 F.3d 158, 161 (4th Cir.
1997); Donaho v. FMC Corp., 74 F.3d 894, 898 (8th Cir.
1996); Bernstein v. CapitalCare, Inc., 70 F.3d 783, 788 (4th
Cir. 1995); Abnathya v. Hoffman-LaRoche, Inc., 2 F.3d 40, 45 (3rd
Cir. 1993); Millensifer v. Retirement Plan, 968 F.2d 1005, 1009 (10th
Cir. 1992); Baker v. United Mine Workers of Am. Health &
Retirement Funds, 929 F.2d 1140, 1144 (6th Cir. 1991).
-
See Donaho, 74 F.3d at 898;
Woolsey v. Marion Lab., Inc., 934 F.2d 1452, 1460 (10th
Cir. 1991).
-
See Brown v. Seitz Foods Inc.
Disability Benefit Plan, 140 F.3d 1198, 1200 (8th Cir.
1998) where the court required Aexpress discretion granting language;@
Wildbur v. ARCO Chemical Co., 974 F.2d 631 (5th Cir. 1992)
where the court held that A[d]iscretionary authority cannot be
implied;@ Cathey v. The Down Chemical Co. Medical Care Program, 907
F.2d 554, 559 (5th Cir. 1990); Perry v. Simplicity Eng.=g,
900 F.2d 963, 965 (6th Cir. 1990), requiring an Aexpress@
grant of discretion; Brown v. Ampco-Pittsburgh Corp., 876 F.2d 546,
550 (6th Cir. 1989) requiring the grant of discretion to be
Aclear;@ Moon v. American Home Assur. Co., 888 F.2d 86, 88 (11th
Cir. 1989) which requires the discretionary authority to be Aexpressly
give[n]@ by the plan.. In contrast, the following circuits may be
willing to imply grants of discretionary powers. A couple of circuits,
however, may be willing to imply grants of discretionary power. See
Luby v. Teamsters Health, Welfare and Pension Trust Funds, 944 F.2d
1176, 1180 (3rd Cir. 1991); De Nobel v. Vitro Corp., 885
F.2d 1180, 1187 (4th Cir. 1989).
-
See Herzberger v. Standard
Ins. Co., 205 F.3d 327, 331 (7th Cir. 2000) (setting forth
the following safe harbor language “[b]enefits under this plan will
be paid only if the plan administrator decides in his discretion that
the applicant is entitled to them”) and Diaz v. Prudential Ins. Co.
of America, 424 F.3d 635, 640 (7th Cir. 2005) (affirming
Herzberger and directing courts to ask whether “the plan gives
adequate notice that the plan administrator is to make a judgment
within the confines of pre-set standards, or if it has the latitude to
shape the application, interpretation, and content of the rules in
each case,” the former requiring the use of the de novo
standard and the latter requiring the use of the arbitrary and
capricious standard).
-
See Firestone v. Bruch, 489
U.S. at 103.
-
See Kathryn J. Kennedy, Judicial
Standard of Review in ERISA Benefit Claim Cases, 50 AMER. U. L.
REV. 1084, 1146 (2001).
-
See, e.g., Makar v. Health
Care Corp, 872 F.2d 80 (4th Cir. 1989); Drinkwater v.
Metropolitan Life Ins. Co., 846 F.2d 821 (1st Cir.), cert.
denied, 488 U.S. 909 (1988); Denton v. First Nat’l Bank, 765
F.2d 1295 (5th Cir. 1985); Wolf v. National Shopmen Pension
Fund, 728 F.2d 182 (3rd Cir. 1984); Amato v. Bernard, 618
F.2d 559 (9th Cir. 1980); Kennedy v. Empire Blue Cross
& Blue Shield, 796 F. Supp. 764 (S.D.N.Y. 1992), aff’d,
989 F.2d 588 (2nd Cir. 1993); Reska v. Pension Plan of
Bethlehem Steel Corp., 669 F. supp. 566 (W.D.N.Y. 1987), aff’d,
848 F.2d 372 (2nd Cir. 1988); Tumulty v. Aetna Life Ins.
Co., 659 F. Supp. 70 (S.D. Fla. 1987).
-
Amato v. Bernard, 618 F.2d 559, 568
(9th Cir. 1980); Foster v. Cordis Corp., 707 F. Supp. 517 (S.D.Fla.
1989); De Pina v. General Dynamics Corp., 674 F. Supp. 46 (D. Mass.
1987); Folke v. Schaffer, 616 F. Supp. 1322, 1325 (D. Del. 1985); Gray
v. Dow Chem. Co., 615 F. Supp. 1040 (W.D. Pa. 1985), aff’d
without opinion, 791 F.2d 917 (3rd cir. 1986); Lieske
v. Morlock, 570 F. Supp. 1425 (N.D. Ill. 1983). Cf. Conley v. Pitney
Bowes, 34 F.3d 714 (8th Cir. 1994) (not requiring
exhaustion when the plan’s notification did not set forth the
claimant’s appeal rights).
-
Michael Tomasek; Helen Darling;
Marty Webb; Nicole Melton.
-
See testimony of Michael
Tomasek.
-
Jacqueline Paul, Paul Boulis, and
Andrew Bernstein.
-
Mark DeBofsky; Dr. Steven Sleigh;
Dr. David Lansky; Mary Ellen Signorille; Debra Potter.
-
223 F.3d 286, 300 (5th
Cir. 2000).
-
See Lee v. Burkhart, 991 F.2d
1004, 1009-10 (2nd Cir. 1993); Curcio v. John Hancock Mut.
Life Ins. Co., 33 Fd.3d 226, 235 (3rd Cir. 1994); Armistead
v. Vernitron Corp., 944 F.2d 1287 (6th Cir. 1991); Miller
v. Taylor Insulation Co., 39 F3d 755, 758 (7th Cir. 1994);
Cannon v. Group Health Serv. Of Okla., 77 F3d 1270 (10th
Cir. 1996). But see Moore v. Metropolitan Life Ins. Co., 856
F.2d 488, 492 (2nd Cir. 1988).
-
See Kane v. Aetna Life Ins.
Co., 893 F.2d 1283 (11th Cir.), cert. denied, 498
U.S. 1011 (1990); Novak v. Irwin Yacht & Marine Corp., 986 F.2d
468, 472 (11th Cir. 1993).
-
DOL Regs. §2560.503-1.
|