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COB and ERISA's Impact

Guest SG

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I would like some feedback regarding a self-funded health plan that in part states, "this plan will always be secondary to auto insurance coverage when applicable." The question is, how is this handled in those states that do not allow COB with auto insurance? Does ERISA override the state law in this case as well? thank you.

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As with so many preemption issues, the courts have reached different results on this one too. You might want to look at two cases: Auto Owners Ins. Co. v. Thorn Apple Valley, Inc., 31 F.3d 371, 18 EBC 1545 (6th Cir. 1994), and Winstead v. Indiana Insurance Company, 855 F.2d 430, 10 EBC 1801 (7th Cir. 1988), cert. denied, 488 U.S. 1030, 10 EBC 1806 (1989).

The first case dealt with what appears to be your situation: a self-funded ERISA plan with a COB (coordination of benefits) provision making it secondary to an individual policy of auto insurance, which, under state insurance law, was also required to be secondary. The Sixth Circuit relied on ERISA preemption principles (in light of the state law) and held that ERISA’s policy of protecting the assets of employee plans required the auto insurer to be primary. However, in the other case, the Seventh Circuit endorsed a pro rata apportionment of liability on similar facts.

There may well be more current cases on the subject. Our ERISA book does not attempt to be an exhaustive treatment of coordination of benefits. But these ones should get you (and your attorney) started down the right path. This area can be very complicated. If the matter gets to litigation, you stand a good chance of getting a judge who is unfamiliar with both the law and practice in this area or, worse, who is familiar only with state insurance law principles. You need an experienced ERISA lawyer with knowledge of the controlling cases in your jurisdiction to protect your interests properly.


Brigid Anderson, Esq.

Senior Editor,

Employee Benefits Institute of America, LLC

Co-author, ERISA Compliance for Health

& Welfare Plans (EBIA 1992-1998)



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Guest Jim Yoxtheimer

I have recently been asked by a very small employer (6 fulltime employees) what are the implications of starting a program to reimburse employees for medical expenses not paid for under their existing health plan up to a dollar limit of $700 - $1,000 per year. I'm aware of many of the administrative challenges, but not the regulatory issues (e.g., does the program needed to be approved by DOL, IRS or others in order to qualify the reimbursement as a benefit and not taxable compensation). Any and all insight would be greatly appreciated. Thanks

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