The DOL has filed an amicus brief here supporting a petition for en banc rehearing in this case–QualChoice, Inc. v. Rowland–decided by the Sixth Circuit last May. (Thanks to Benefitslink.com for the pointer.) The case involved the common scenario of a health plan advancing money to a participant for medical expenses arising from an accident, with the participant then obtaining a settlement against a third-party tortfeasor, and the health plan seeking reimbursement for the medical expenses under the health plan’s reimbursement provision. The case involves the legal controversy over the Great-West case and what a plan can recover as “appropriate equitable relief” under the Supreme Court’s 2002 decision in Great-West.
The DOL argues in its brief that the Sixth Circuit in QualChoice was wrong in holding “that a fiduciary’s action to enforce a plan reimbursement provision is a legal action, regardless of whether the plan participant or beneficiary recovered from another entity and possesses that recovery in an identifiable fund.” The DOL goes on to state that such a holding is inconsistent with the Supreme Court’s analysis in Great-West. The DOL then emphasizes how the Sixth Circuit’s decision could exacerbate the conflict in the circuit courts over the issue (i.e. the circuit courts are split) and could negatively impact health plans in general:
In addition to being in conflict with the decisions of other circuits and in significant tension with Supreme Court precedent, the panel’s decision is of exceptional importance for other reasons: by reading section 502(a)(3) to disallow enforcement of subrogation provisions because they are grounded in contract, the decision is likely not only to add significantly to the costs borne by ERISA health care plans, but could also prevent participants and fiduciaries from bringing suit under section 502(a)(3) to enforce the terms of the plan.
As of 2002, an estimated 137 million people participated in private sector employer-sponsored health care plans covered by ERISA. Many of these plans contain reimbursement/subrogation provisions. Indeed, in 2000, the largest provider of subrogation services in the United States reported subrogation recoveries that averaged $4.8 million for every one million persons covered by its client. See Healthcare Recoveries, Inc., SEC Form 10K (Mar. 27, 2001). By flatly prohibiting such recoveries, the panel’s decision is likely to have a large economic impact on health care plans in this Circuit, and may lead some employers to respond by dropping or decreasing coverage.Furthermore, under the logic of the panel’s reasoning that section 502(a)(3) does not allow enforcement of a plan subrogation provision because it is grounded in contract, no attempt to enforce a plan term would be permissible. This reads out of section 502(a)(3) the right to “enforce . . . the terms of the plan.” 29 U.S.C. § 1132(a)(3). Such a construction may have unforeseen consequences on the enforcement of ERISA beyond the subrogation context, and should be avoided under ordinary rules of statutory construction.
It will be very interesting to see how the court responds to the petition for rehearing and whether or not the Supreme Court will eventually step in again to try to make sense out of this very muddled area of the law.