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Payor as ERISA "Fiduciary" offering protection from draconian payment practices?

               December 11, 2014
 
      Contributed to by:  Richard Zimmerman, Esq. 

Today’s newsletter is more of an academic assessment of a growing legal argument being raised in challenges against certain conduct by third party payors.  So, this topic may not be of interest to all, but for those of us working with carriers, we thought you might appreciate a peak behind the “appropriate conduct” curtain and the standards carriers are held to – which recent trends indicate will hopefully be set at a higher bar.  The bar we are hoping will be set is to establish that third party payors are, in fact, fiduciaries and subject to the onerous and many requirements set forth under ERISA, which is the federal law governing pension plans in private industries. 

Should carriers qualify, they would be held to the status of a “fiduciary” on behalf of plan participants and their beneficiaries, with the exclusive purpose of providing benefits to them. As a fiduciary, carriers would be limited in the criteria they may apply to claims that are submitted, and would have strict regulations for the appeals process that they would be obligated to establish and follow. This is particularly significant because appealing a rejected claim by a private insurance carrier is virtually always an uphill battle for the practitioner, as the carrier has every incentive to make the appeal as difficult as possible. If they are held to the status of a fiduciary, however, the payor will be responsible for acting in the interest of plan beneficiaries, as opposed to just themselves.  Practically speaking, the payor would have less justification for denials, meaning, the shenanigans some of you may be facing in payment disputes, prepay reviews and post-payment audits would be less tolerated and it would be easier to be paid!

Many actors involved in an insurance plan are considered fiduciaries under the law – including administrators, trustees, investment managers, and other individuals who have the power to exercise discretion over the administration of the plan. If the same status is applied to the carriers of the plans themselves, it would have a profound impact on the audit process, making it much more favorable to insurance beneficiaries – as well as healthcare providers – as a result. We are addressing this topic because recent case law has indicated a growing trend towards reliance on the "fiduciary" concept in fighting insurance companies in adverse determinations, in particular as related to post-payment audits.  

While we are not convinced the ERISA challenge is a "slam dunk", we are hopeful progress through the courts will allow practitioners to avail themselves to this line of reasoning to garner more protections. 

Certainly, we will keep you apprised of developments. 
 


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