Recent Developments In Health Benefit Claims

This article addresses issues that employers and health

plans regularly face. Generally, claims for benefits under

these employee welfare benefit plans are governed by federal

law the Employee Retirement Income Security Act (ERISA). As

illustrated below, although ERISA is a federal statute and it

has been in effect for over thirty years, some issues remain

unsettled and courts in different jurisdictions often interpret

portions of the statute in conflicting ways.

Scope Of ERISA Pre-Emption

Most people receive health coverage through their employer

or the employer of their spouse or parent. The ERISA statute

allows for the resolution of disputes in federal courts. 29

U.S.C. 1132(e). Moreover, ERISA contains a broad preemption

of state laws. See Aetna Health Inc. v. Davila, 524 U.S. 200,

209 (2004)("Any state-law cause of action that duplicates,

supplements, or supplants the ERISA civil enforcement remedy

conflicts with the clear congressional intent to make the ERISA

remedy exclusive and is therefore preempted").

The scope of ERISA pre-emption was also called into question

when Maryland passed the Fair Share Health Care Fund Act which

required employers with 10,000 or more employees to spend at

least 8% of their total payroll on employee health insurance or

pay the difference to the State of Maryland. Obviously, the

statute was directed toward one employer Wal-Mart Stores, Inc.

In Retail Indus. Leaders Assn v. Fielder, 475 F.3d 180 (4th

Cir. 2007), the court concluded that the Maryland Act

"related to" Wal-Marts employee benefit plan because

it effectively required the employer to restructure its health

insurance plans. Accordingly, the Court of Appeals for the

Fourth Circuit concluded that the state law was pre-empted by

ERISA.

The Ninth Circuit in California recently suggested that a

similar law was not pre-empted. San Francisco passed an

ordinance which required employers with more than 50 employees

within the city to provide health coverage to its employees or

pay the health costs directly to the city.

The U.S. District Court concluded that the law was

pre-empted and enjoined its implementation. On January 9, 2008,

the Ninth Circuit lifted the stay while the validity of the

ordinance was being addressed by the appellate court. Golden

Gate Restaurant Assn v. City and County of San Francisco, __

F.3d __, 2008 WL 90078 (9th Cir. Jan. 9, 2008). According to

the Ninth Circuit, the ordinance did not "relate to"

ERISA plans because an employer could satisfy its obligations

by making payments directly to the city. This did not appear to

be any different than the "option" in the Maryland

statute which the Fourth Circuit found to be pre-empted.

Interestingly, the Ninth Circuit did not even mention the

Fourth Circuits ruling.

Reimbursement Claims

Notwithstanding two fairly recent decisions by the Supreme

Court of the United States concerning reimbursement/subrogation

actions, there is still a considerable amount of litigation on

this subject. In Great West Life & Annuity Insurance

Company v. Knudson, 534 U.S. 204 (2002), the Court held that

when the claim by an ERISA plan for reimbursement merely seeks

from the defendant money that is owed, it is not a claim for

equitable relief and it is not allowed under ERISA. To proceed

under ERISA, the Court imposed a traceability requirement on

the money being claimed. The Supreme Court revisited the issue

in Sereboff v. Mid. Atl. Med. Servs. Inc., 126 S. Ct. 1869

(2006), in which the Court clarified its earlier decision in

Knudson.

In Sereboff, the Court stated that strict tracing is not

required when the right to the funds derives from an equitable

lien by agreement...