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Medical insurer wants paid claim reimbursed from Plan Sponsor


Guest Bearlee
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Guest Bearlee

This is an ERISA H&W plan.

Participant had coverage with medical insurer #1. She had cancer and insurer #1 would not cover some particular treatments she wanted/needed. She went to HR and HR said she could disenroll with insurer #1 and go with insurer #2 under their package of insurance providers, because #2 provides such cancer treatments. This was one a month before open enrollment and the HR person wrote on #2 insurer's enrollment forms, "loss of coverage" as the special enrollment event.

Well, the participant received the treatment. First she had $200K of treatment and insurer #2 paid the claim. Insurer #2 then sent out its audit person to make sure she was legitimately enrolled, whereupon it was determined that she was enrolled against their policies. She also received $1M more worth of treatment which #2 insurer has not paid the claim yet. Insurer #2 is now going after the plan sponsor for the $200K and presumably the $1M, because the plan sponsor allowed in a participant that had no right to enroll.

My questions:

1. Are these claims for money/legal damages which are impermissible under ERISA? Are Great West and Sereboff applicable even though these are not those facts?

2. Did the participant have special enrollment rights in a sort of "constructive" loss of coverage? The following regs. do mention losing coverage due to one being part of a similarly situated class - could that be a similar class of cancer victims? In other words, could the #1 insurer have been discriminating based on a health factor, which gave the participant special enrollment rights? See regs. below.

Thanks everyone. Any input would be really appreciated. Have a nice day.

Labor Reg. § 2590.701-6(a):

(3) Conditions for special enrollment—

(i) Loss of eligibility for coverage.

Loss of eligibility for coverage under this paragraph (a)(3)(i) includes (but is not limited to)—

(E) A situation in which a plan no longer offers any benefits to the class of similarly situated individuals (as described in § 2590.702(d)) that includes the individual.

Labor Reg. § 2590.702(d):

[ERISA § 702(d) is the section where a group health plan, or health insurance issuer, cannot use genetic information for underwriting and coverage purposes]

(d) Similarly situated individuals.

…if individuals have a choice of two or more benefit packages, individuals choosing one benefit package may be treated as one or more groups of similarly situated individuals distinct from individuals choosing another benefit package.

However, a classification based on any health factor is not a bona fide employment-based classification, unless the requirements of paragraph (g) of this section are satisfied (permitting favorable treatment of individuals with adverse health factors).

(3) Discrimination directed at individuals. Notwithstanding paragraphs (d)(1) and (2) of this section, if the creation or modification of an employment or coverage classification is directed at individual participants or beneficiaries based on any health factor of the participants or beneficiaries, the classification is not permitted under this paragraph (d), unless it is permitted under paragraph (g) of this section (permitting favorable treatment of individuals with adverse health factors). Thus, if an employer modified an employment-based classification to single out, based on a health factor, individual participants and beneficiaries and deny them health coverage, the new classification would not be permitted under this section.

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  • 3 months later...

Not a lawyer, not involved with health insurance (except as a consumer).

Sounds like fraud on the employer's part. The insurance company's claims are not related, in my opinion, to an ERISA plan but to the adverse consequences of the employer's deliberate behavior. I can see no legitimate reason to shield the employer from the insurer's action.

Always check with your actuary first!

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