Month: March 2004

The following articles give us some insight into what was discussed yesterday in oral arguments before the U.S. Supreme Court in the combined cases of Aetna Health Inc v. Davila, No. 02-1845, Cigna Healthcare of Texas v. Calad, No. 03-83. The main issue being argued is whether ERISA completely preempts state-law claims by ERISA plan participants or beneficiaries against an HMO where the claims challenge an HMO’s decision to deny coverage of treatment or care that was prescribed by the claimant’s physician but that the HMO decided was not authorized under the plan’s “medical necessity” provision.

The New York Times: “Justices Hear Arguments About H.M.O. Malpractice Lawsuits“:

George P. Young, the patients’ lawyer, said the inability of people like his clients to recover damages under federal law had necessitated the state’s action. “What Texas has done is to fill a vacuum and say we are going to set out a professional medical standard of care when H.M.O.’s make medical necessity decisions,” Mr. Young told the court. He said that under the companies’ position “they would be free to say we’re going to use the medical-necessity standard of a witch doctor or whatever we decide it is.”

Both Justice Antonin Scalia and Chief Justice William H. Rehnquist indicated that they saw the dispute as one over the value of benefits rather than quality of care. “To say that the plan condemned them to not using Vioxx is simply not true,” Justice Scalia told Mr. Young. “All you’re talking about here is money. The claimant didn’t want to lay out the additional money for the Vioxx.”

CNN: “Justices appear split on HMO issue“:

In arguments Tuesday, the justices wrestled with conflicting definitions of care and coverage. “To make a coverage decision, doesn’t one have to make a medical judgment?” asked Justice John Paul Stevens. Justice Sandra Day O’Connor seemed to agree. “If you’re [insurance companies] telling doctors what’s medically necessary, then aren’t you defining necessities of medical care?”

The Washington Post: “Justices Seem Unlikely To Allow Suing Insurers“:

But Chief Justice William H. Rehnquist, echoing a point made earlier by health insurance company lawyer Miguel A. Estrada, replied that HMOs and other managed-care firms do not decide on treatment. “Their statement is they just won’t pay for it,” he said.

Mattax countered that a payment decision, based in part on a judgment about what the necessary and appropriate treatment would be, “is still a medical judgment.”

But Justice Stephen G. Breyer, while expressing sympathy for patients who are denied benefits, said that state lawsuits “seem to be the thing this [federal] statute forbids, and I don’t see a way around it.”

The Boston Globe: “Justices seem to back HMOs on a patient-rights question.“:

All but a few of the nine justices voiced negative reactions to a Texas law that allows patients to seek damages when an HMO denies coverage for treatment it says is not needed — despite a doctor’s recommendation. Texas is one of 10 states with such laws.

You can access many of the briefs filed in the combined cases at this link and this link.

The Senate Judiciary Committee held a hearing today on marriage entitled “A Proposed Constitutional Amendment to Preserve Traditional Marriage.” You can read the testimony of U.S. Senator John Cornyn (R-Tx) here as well as the testimony of others here. Also, How Appealing reports that a blog post made it into the record at today’s hearing.

Global Crossing Settlement:

WOKR-TV 1: “Global Crossing Settlement Helps Some Local Pensions“:

After a year of negotiations, former officers of Global Crossing have finally settled a class action lawsuit. . . To break down the $325 million settlement: $240 million will be paid to shareholders; $79 million will go to workers who lost their 401K plans; $1 million will go to those who lost severance packages.

New York Times: “Global Crossing Settles for $325 Million“:

Ralph Ferrara, a lawyer at Debevoise & Plimpton in Washington, who represented Global Crossing’s directors and officers, said he thought the recovery for the employees of Global Crossing was the largest ever under the Employee Retirement Income Security Act. And he said the securities case was a landmark result “because it’s the first of these leviathan-sized cases to come to a successful close and will serve as a benchmark for all of the others of how to do it.”

Blogger Lyle Roberts at the 10b-5daily.com: “Global Crossing Settles.”

The Wall Street Journal (subscription required): “Global Crossing SEC Deal Is Expected“:

A $325 million securities class-action settlement for former shareholders and employees of Global Crossing Ltd. helps pave the way for a settlement deal between the telecom company and the Securities and Exchange Commission over alleged accounting fraud. . . Under the settlement announced Friday, shareholders and employees who lost billions in the troubled telecommunications company will receive $325 million from Global Crossing’s former officers, directors and outside lawyers. Company founder and former Chairman Gary Winnick will pay a total of $55 million, while insurance companies for former officers and directors agreed to pay roughly $280 million. The company’s former law firm . . . which was not a defendant and did not admit to any wrongdoing, agreed to pay $19.5 million.

U.S. Supreme Court Hears Arguments in HMO Case:

The U.S. Supreme Court is hearing arguments today in the combined cases of Aetna Health Inc v. Davila, No. 02-1845, Cigna Healthcare of Texas v. Calad, No. 03-83. You can access the following articles on the case:

• USAToday.com: “Patients’ fight for right to sue insurers goes to top court”
• The Insurance Journal: “Patients’ Right-to-Sue Case Reaches Supreme Court”
• Washington Times: “Court weighs HMO liability”

The Associated Press via Findlaw.com has this article: “HMO Horror Story’ Comes to Supreme Court“:

Insurers, backed by the Chamber of Commerce and others, argued in court filings that ERISA has its own procedures for reviewing or appealing coverage decisions, and that sidestepping the federal law would lead to more lawsuits and drive up health care costs. On the other side, trial lawyers, medical organizations and numerous states argued that states should have the right to hold HMOs accountable if treatment decisions shortchange patients.

Other news:

Press Release: “Travelers Bond Announces New ERISA HelpLine for Fiduciary Liability Insureds“:

Travelers Bond, a division of Travelers Property Casualty Corp. (NYSE: TAP.A and TAP.B), announces the debut of its ERISA Help Line . . . The new ERISA HelpLine is staffed by attorneys with a national ERISA practice from the law offices of Alston & Bird, a firm based in Atlanta, Ga. Companies that purchase Fiduciary Liability PLUS+(R), or fiduciary coverage under one of Travelers Bond’s executive liability package policies, can access the HelpLine via a toll-free number and receive up to one hour of consultation with an ERISA attorney at no charge.

The Wall Street Journal (subscription required): “Expected Cost Savings From Medicare Act May Top $11.8 Billion.”

A benefit to earnings is coming. So far, 18 large companies have estimated in their 2003 reports that the recently passed Medicare Act would collectively save them more than $11.8 billion in benefit costs over time, according to a report by Bear Stearns Monday. The bill entitles employers who provide certain drug benefits to receive subsidies beginning in 2006. The projected savings, under a proposed accounting guideline, will in most cases flow to the bottom line gradually.

The Wall Street Journal (subscription required): “Next on the Outsourcing List: Job Shift to Cheaper Countries Could Threaten More Careers: Analysts, Architects, Attorneys.”

The PBGC has issued Technical Update 04-2: Extension of PBGC Reporting Relief Relating to Use of 100% of 30-Year Treasury Yield” which states:

In Technical Update 02-1, the PBGC permitted use of 100% (rather than 85%) of the annual yield on 30-year Treasuries to value vested benefits for certain PBGC reporting purposes, with the relief tied to reporting periods or events occurring or becoming effective during calendar years 2002 or 2003. This Technical Update extends that relief beyond calendar year 2003, through and including May 31, 2004. . . The PBGC is providing the reporting relief in this Technical Update 04-2 as an interim measure pending legislative developments. Legislation is pending that would change the required interest rate for calculating vested benefits for the PBGC’s VRP on a temporary basis for plan years beginning in 2004 or 2005. Once the legislative situation is clarified, the PBGC will consider whether there is a need for further guidance or further reporting relief. However, the PBGC emphasizes that the interim reporting relief provided in this Technical Update will remain in effect notwithstanding any such legislative change, and is in addition to any PBGC reporting relief that may result from such a legislative change.

Reuters: “Pensions Take More Risks as Shortfalls Grow-Survey“:

U.S. pension plans are seeking better returns by slightly increasing their investment risk as funding shortfalls in a growing number of plans raise concerns, a report said on Monday. Pension funds are also hiring fund managers “at an unprecedented rate” as they look for ideas to “help them keep pace with their hefty obligations,” said Greenwich Associates’ 2004 report on the U.S. investment management industry.

The Salt Lake Tribune: “Polygamists see potential in recent marital movement “:

How would insurance benefits be divided in a legal plural marriage? Who would be first in line for the pension? And what would happen to the already strained Social Security system? America has matrimony on its mind as the debate over gay marriage rages and talk swirls that polygamous unions could become part of the battle.

Plain Dealer: “The $1.7 million pension fund that vanished“:

Keith Lewandowski and other managers at Lakewood Manufacturing had long suspected something was amiss with their pension fund. . . What they found was shocking: Their $1.7 million pension account was virtually empty. Their boss had used the funds to invest in his own fledgling businesses, in violation of federal laws protecting pensions.

The Miami Herald: “Rising cost of health insurance forces businesses to make adjustments“:

HSAs seem to be reaching the uninsured, says Jamie Amaral of the National Federation of Independent Business. “Seventy percent of the people buying this coverage didn’t have insurance before. The high-deductible plans are saving the typical worker 42 percent” off low-deductible insurance.

Law.com: “The Outlook for 2004: A Recruiter Roundtable.” In answer to the question of what changes in the profession we are likely to see, Avis Caravello had this answer:

[I]n two or three years there’s going to be a massive shortage of mid-level corporate associates, mid-level to senior corporate associates, the likes we’ve yet to see. They have all been decimated from this market in the past two or three years. As things pick up, firms are going to be looking for those people. So three or four years from now, we will have that big shortage and we’ll be running around trying to find those folks.

Pensions:

The New York Times: “Concerns Raised Over Consultants to Pension Funds“:

A small but growing part of the $2 trillion in state and local pension funds is being steered into high-risk investments by pension consultants and others who often have business dealings with the very money managers they recommend. . . The Securities and Exchange Commission is so concerned that it has begun an inquiry into the practices of pension consultants, who serve as gatekeepers for thousands of money managers.

The New York Times: “In Louisiana, a Pension Official Blows the Whistle on Adviser Conflicts.”

Health care and health savings accounts:

Forbes.com: “Don’t Bank On Health Savings Accounts“:

A recent survey by Watson Wyatt and the National Business Group on Health found that 32% of large companies expect to offer employees some sort of high-deductible, consumer-directed option next year, up from 21% this year. But few employers are ready yet to push all their workers into such plans.

Bonitanews.com: “Oklahoma firm accuses local hospitals of price-fixing“:

Hospitals have one set of prices for the various services they provide. But those fees are almost always very high and most officials acknowledge that few people pay the full amounts. Reimbursement from Medicare and Medicaid can be 70 percent or more below established hospital fees. . . That pricing system, though, hurts the people who sign up with Medical Savings, according to the lawsuit. The company specializes in health savings accounts, which require its customers to bear a fairly “significant level of self insurance.” (A very interesting angle on the new health savings accounts.)

A Press Release from Watson Wyatt: “Engaging Workers in Health Benefit Decisions Appears to Yield Significant Cost Savings“:

One method employers are using successfully to change employee behavior is increasing financial tension, i.e., using plan designs and other mechanisms to increase price sensitivity among employees. For example, one out of four employers said they significantly increased either premiums or cost provisions at the point-of-care. There was also an increase last year in the number of employers that implemented a high-deductible health plan without a reimbursement arrangement.

The Employer-Employee Relations Subcommittee of the Committee on Education and the Workforce held a hearing yesterday entitled “Reforming and Strengthening Defined Benefit Plans: Examining the Health of the Multiemployer Pension System.” You can access testimony given at the hearing here and a press release about the hearing here.

PlanSponsor.com: “GAO: Careful With Multiemployer Legislation“:

[T]he GAO found the percentage of multiemployer plan that were fully funded fell to 67% in 2002, from 83% in 2001. . . However, the GAO found the level of exposure the PBGC faces from this liability with multiemployer plans is nowhere near that of single-employer plans. . . . This is due to the regulatory framework in place for these plans that distributes financial risks toward employers and employees and away from the federal government.

Morningstar.com has posted an instructional article on the rules governing required minimum distributions: “Getting Required Distributions Right: Errors in calculating retirement plan withdrawals can cost you.”

The Indianapolis Star: “Governor approves pension secrecy“:

Nearly every detail of state lawmakers’ individual pensions will remain secret under a bill Gov. Joe Kernan signed into law Thursday, the final day he could act on legislation passed during the 2004 General Assembly. . . Charles Davis, executive director of the Freedom of Information Center at the University of Missouri, has said the change in the law sets Indiana apart. Other states at least make public the amounts of public employees’ pensions.

The Philadelphia Inquirer: “Mr. 401(k) returns to his roots“:

[Ted] Benna, 64, now is going back to his roots, launching a company in Williamsport called Malvern to administer retirement plans for small businesses. With the new venture, he is returning to the work he did in 1981 in Langhorne at the Johnson Cos., his former employer. Johnson, a benefits firm, sponsored the first 401(k) plan ever, using its own workers as guinea pigs.

Baby Boomers and others have a great deal to worry about these days–the Social Security crisis, underfunded pension plans, rising health care costs which threaten to leave many uninsured, and 401(k) accounts which have plummeted in value. . . And now there could be an additional worry–asteroids hitting the earth. According to this article from the Boston Globe–“Asteroid scare exposes flaws in early warning system“:

It could have been a scene from a B-grade doomsday movie: Some of the nation’s most respected astronomers weighed a call to top NASA authorities — and ultimately the White House — to say a large asteroid was streaking toward Earth and could hit within days.

And this from the National Geographic in an article entitled “Asteroid False Alarm Shows Limits of Alert Systems“:

Smaller asteroids can appear without notice and could potentially hit Earth in hours or even minutes. An asteroid that is 100 feet (30 meters) across—the original estimate of the 2004 AS1—would probably explode in the atmosphere with the force of a one-megaton bomb, setting off hurricane winds. . . NASA’s Johnson admits there is no concerted effort at the moment to find smaller asteroids.

You can read more about it here from the NASA folks: “Recently Discovered Near-Earth Asteroid Makes Record-breaking Approach to Earth.”

Also, this article from the New York Times: “When to Post ‘Watch for Falling Asteroid’ Sign.”

You can actually view the asteroid that “narrowly” missed the earth here.

I guess it is comforting to know that great minds have been meeting to discuss the issue. Read about what was said at the “Planetary Defense Conference (Protecting the Earth from Asteroids)” here.

For those of you following the In re: WorldCom, Inc. ERISA Litigation, you may recall an entry in January of this year entitled “Directors and the Duty to Monitor Under ERISA” where I discussed the DOL’s Amicus Brief filed in the case and the issue being debated regarding the scope of the appointing fiduciary’s duty to monitor appointed fiduciaries under ERISA. If you would like to read the Memorandum of Law, prepared and filed by Simpson Thacher & Bartlett LLP in response to the Brief of the Secretary of Labor as Amicus Curiae in Opposition to the Individual Defendants’ Motion to Dismiss, you can access it here.