Self-insured medical plan ... can an unhappy participant ever sue in S

[Moe Howard]

It was my understanding that fully-insured medical plans are governed by State Law ... and that self-insured medical plans are governed by ERISA.

Can a participant (whose medical claim is denied by his employer's "self-insured medical plan") ever sue his employer/ plan sponsor in State Court? ... or is he only allowed to sue in Federal Court ?

[jeanine]

Of course he can sue in state court--the question is, will he be able to keep his case in state court. Any defense attorney who is on the ball will remove it to federal court. A lot is going to depend on the circumstances and the district where the self-insured plan is located. Five-ten years ago I would have said "absolutely not" but given the political climate I'm not so sure. The Ninth Circuit has been pretty creative in this area lately.

[GBurns]

Yes in many cases he can sue in State Court. But first make sure of ALL the parties to be sued and why. You said that the claim was denied by "his employer's self-insured medical plan". That is impossible. The plan is not a communicating entity it is a paper entity. The denial had to be done by either the claims administrator or the service provider. The claims administrator and the service provider in many cases are insurance companies definitely under state jurisdiction.

Remember an employer provided accident and health plan is any arrangement that an employer makes to pay the expenses of medical care for its employees. It may be insured or it may be uninsured(self-funded).The actual services provided by a service provider whether it be a contracted PPO, HMO or insurance company is separate and apart from the employer's plan.

[Moe Howard]

GBurns: I understand your point that the self-insured plan is not a legal entity and that the service providers are (ie: TPA, claims administrator ...etc). But isn't it true that a service provider can only make recommendations to the employer regarding "denial of a claim" and thus, only the employer has legal liability to the participant regarding claim denial ? In-other-words, a participant has no contractual agreement with any service provider of the employer ... and as a result the participant can never sue the service provider. But a participant can sue the employer if the employer stands by the improper recommendation of claim denial furnished by the service provider.

Can the participant ever sue the employer in State Court ?

[GBurns]

The employer should be neutral. This not only should be for legal reasons but also for employee relations, let someone else be the bad guy.

Yes I have seen employers sued in state court but if I remember correctly it was always caused by them being too involved. The employer has no qualifications to make decision on medical matters and is not licensed (or bonded) as a TPA. If they dont outsource to a competent party then they leave themselves open to all sorts of fiduciary and other problems most of which will be state employment and contractual obligations problems.

I might soon have time to get you some cites of recent cases.

[jeanine]

Some employers self-fund and self-administer. The plan is in fact a separate legal entity, distinct from the employer. The plan administrator (different from the third-party administrator) is often a key employee of the sponsoring employer. The TPA is only following the orders and guidelines of the plan adminstrator and hence the employer. We have sucessfully removed ourselves from subrogation litigation but have never had to argue this position in a benefits claim litigation (yet) as a TPA.

Look at the new privacy rules under HIPAA. One of the things it explains really well is the separate but intertwined relationship of the employer and the plan.

[Moe Howard]

Jeanine: How can a self-insured medical plan be a separate legal entity ... if a legal trust does not exist ?

There are two kinds of self-insured plans ... unfunded and self-funded.

A legal trust does not exist for an unfunded plan, and therefore the employer must bear the full liabilty. All claims are paid from the employer's assets. Only the employer can be sued.

A legal trust does exist for a self-funded plan, and therefore this type of self insured plan is a separate legal entity, and thus .. this type plan can be sued.

(Only the employer or trust can sue a service provider. A plan participant can never sue a service provider. Am I correct ???)