ERISA Litigation Watch
For Self-Insured Plan Administrators
Voluntary Compliance Is the Best Defense

Is A Plan Administrator For A Self-Insured Plan Still Responsible Or Liable For Relevant Document Disclosure Under ERISA §1024(B)(4) Even If A TPA Is Doing Medical Reviews Or Review Of Appeals?

These two recent federal appeals court rulings illustrate compliance responsibility and liability for self-insured plans administered by a third-party administrator as to what would constitute a relevant plan document under ERISA §1024(b)(4) and who shall be liable for violating ERISA §1024(b)(4). The plan administrators for self-insured plans are advised to seek accurate legal advice in this critical but most confusing area of plan liability, civil and criminal, in order to avoid unanticipated legal and financial consequences. Voluntary Compliance Is the Best Defense against litigation and skyrocketing health care costs.

In Sharon Mondry v. American Family Mutual Insurance Company, Et Al.,(7th. Cir.,03/05/2009), CIGNA was not found to be liable as the plan administrator for failure to disclose plan documents, however the self-funded plan sponsor and plan administrator, American Family Insurance was found to be liable for failure to produce the SPD and internal claim documents on which the initial denial and subsequent appeal were based on and American Family is liable for statutory penalty for failure to disclose plan SPD. In Sgro v Danone Waters of N. Am., Inc, the plan administrator for the self-insured plan was ordered to obtain the relevant plan documents from the TPA and then disclose to the claimant.

Sharon Mondry v. American Family Mutual Insurance Company, Et Al
7th. Cir.,03/05/2009

“Mondry was entitled to copies of the service agreement between American Family and CIGNA, the BIRT, and the CRT, and American Family as the plan administrator is liable for its failure to produce these documents to Mondry within thirty days of her written requests for them. We have no doubt that had these documents (in particular, the BIRT and CRT) been produced to her in a timely fashion, CIGNA’s apparent negligence in denying Mondry’s claim for reimbursement for her son’s speech therapy would have been rectified much sooner than it was. Mondry is entitled to statutory penalties for the late production. Although we affirm dismissal of Count One of Mondry’s complaint as against CIGNA, because CIGNA was not the plan administrator, we shall reverse the district court’s entry of summary judgment in favor of American Family and remand with directions to enter summary judgment in favor of Mondry and against American Family on Count One. The determination of the appropriate amount is a matter within the district court’s discretion. § 1132(c)(1); see Ames, 170 F.3d at 759-60. We shall remand the case to the district court for a determination as to the appropriate amount of the penalty.” (Emphasis added)

“The district court correctly dismissed Counts One and Two of the complaint as to CIGNA. However, the court erred in entering summary judgment in favor of American Family on these counts. As to Count One, Mondry has established that American Family failed in its statutory obligation to produce plan documents to Mondry under section 1024(b)(4) and therefore is liable for statutory penalties under section 1132(c)(1). The material facts as to that count are not in dispute, and Mondry is entitled to summary judgment finding American Family liable for violating section 1024(b)(4). As to Count Two, Mondry has presented evidence from which the finder of fact could conclude that American Family violated its fiduciary obligation to her by failing to comply with its obligation under section 1024(b)(4). She is entitled to a trial on that count. We therefore reverse the district court’s entry of summary judgment in favor of American” (emphasis added)

Sgro v Danone Waters of N. Am., Inc
9th Cir. July 2, 2008

“…….Administrators must now turn over, on request, the documents “generated in the course of making the benefit determination.” See 65 Fed. Reg.70246, 70271 (Nov. 21, 2000). Where, as here, a third party makes the benefit determination, the administrator may not have the needed documents on hand, so it will have to get them from the third party. But nothing in the amendments purports to make that third party directly liable to beneficiaries as if it were itself an “administrator.” …..29 C.F.R. § 2560.503-1(h)(2)(iii). The documents that MetLife is alleged to have held back are “relevant,” and thus covered by this regulation, because they were “generated in the course of making the benefit determination.” Id. § 2560.503-1(m)(8)(ii). ERISA’s remedies provision gives Sgro a cause of action to sue a plan “administrator” who doesn’t comply with a “request for . . . information.” 29 U.S.C. § 1132(c)(1)” (emphasis added)

            Fraudulent benefit reviews, manufacturing or fabricating medical reviews and any intentional deception may also violate criminal code, 29 USC §1141, under ERISA. In a recent official response from US Department of Justice to a complaint filed against certain plan administrators, Mr. Bruce G. Ohr, Chief of Organized Crime and Racketeering Section of U.S. Department of Justice advised:

“In addition to the EBSA, the FBI also investigates health care fraud and other federal crimes involving employee benefit plans, including violations of section 1141. In the event that any further inquiry by those agencies detects evidence of possible violations of federal criminal law, such evidence will be referred to the appropriate office of the Department of Justice for consideration of possible prosecution. Thank you for your inquiry.”

For your compliance assistance, the following is from U.S. Department of Justice Criminal Resource Manual:

            CRC, Claims Recovery Company, LLC, www.crcclaim.com, is dedicated to assisting health care providers and employee benefit plans with voluntary compliance to avoid costly and lengthy litigations and to curb health care costs in accordance with U.S. Supreme Court ruling in Aetna v. Davila, and CRC’s advocacy for voluntary compliance was inspired by American Benefits Council’s advocacy for ERISA appeals by health care providers. “The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans”.

Supreme Court Ruling on Health Care Claims Raises Important Policy Issues: American Benefits Council Responds to Critics of Today's Davila, Calad Rulings:
"These review procedures are available under ERISA to help patients get the care they deserve, quickly and without having to resort to costly and lengthy legal procedures. Clearly, a speedy and factual review aided by the expertise of the physicians involved with these two cases could have avoided the need for the courts to be involved at all," Klein said.
ERISA is intended to protection patients, not enrich plaintiffs' attorneys. If the objective is to ensure healthy and safe outcomes for patients, then certainly efficient review of claims disputes under ERISA, not inviting litigation, is the way to go," Klein added.”   <http://www.americanbenefitscouncil.org/newsroom/pr04-32.cfm>