Our host, Sean Harris, talks with Columbus attorney Scott Stitt about the ever changing world of ERISA litigation. Scott discusses ERISA at the fundamental level and shares recent rulings from the Supreme Court of the United States.
Sean: Hello and welcome to Civilly Speaking, OAJ’s podcast of trending legal topics. I am your host Sean Harris. We are pleased today to have Scott Stitt with us from the firm of Tucker Ellis in Columbus. Scott, thank you for joining us.
Scott: Great, thanks for having me.
Sean: Our topic today is ERISA, which I can tell you from an injury practitioners perspective, I hear that word and my eyes immediately glaze over. At a very fundamental level, what is ERISA?
Scott: Well, it is a federal law at a very fundamental level. It’s a federal law that deals with the benefits to which private employers provide their employees. Be it pension benefits like a 401K, be it health benefits like health insurance or a disability policy or anything in between. But, it’s private employers, not government, not churches, and it’s the benefits that those employers provide.
Sean: So it is a law that governs how benefits are provided.
Scott: Yeah, and different regulations that go along with that would be the most succinct way to put it.
Sean: You mentioned that it applies to private employers, is it all private employers?
Scott: Yes, it is essentially all private employers. As I mentioned the only real exceptions are government and churches.
Sean: One of the questions I know that I am faced with, and I don’t know the answer to, which is trying to determine whether or not a given policy is “an ERISA policy” or not.
Sean: Is there is an easy way to find out?
Scott: You really have to get the plan document, is really the right answer there. Your tort lawyers are not the only ones whose eyes glaze over when they hear ERISA. All of my friends eyes glaze over and practically every non-ERISA lawyers eyes glaze over when ERISA comes up. If you are dealing with the typically reimbursement subrogation situation, where you have a client who has a personal injury claim and they have medical benefits that got paid from a plan, any sort of medical benefits that got paid. You need to figure out whether or not it came from an insured plan, a self-insured plan, or some sort of government plan, be it Medicare, Medicaid, whatever. So the answer to your question is that you need a copy of the plan document that governs the plan that was covering your client.
Sean: And that is a great point. You specifically used the word “plan document” and not the insurance policy.
Sean: Those are two different documents.
Scott: They are. And they can sometimes be the same document if it’s an insured plan that they’ve got one big document. But if it is an ERISA plan, ERISA requires, among many other things, three things that every participant or beneficiary is entitled to receive. A plan document, a summary plan description or what people call the SPD, and an annual statement. So, everyone participant or beneficiary can ask for that. ERISA requires the plans to provide that within 30 days. If they don’t get it there is a statutory penalty under 29 USC 1132C for not getting those documents within 30 days. So the answer to your question is, have the client or the spouse of the client, whatever person with the plan that is providing coverage, have that person make a request for the plan document, summary plan description, and the annual statement. It should be pretty clear, even if you are not an ERISA expert, whether or not it is an insured plan or a self-insured plan. If it is an insured plan, you are dealing with insurance law, you are dealing with Ohio insurance law and all of those issues that the listeners are probably more familiar with than the ERISA issues. If it’s self-insured than you are in ERISA Law.
Sean: I see. I was going to ask you the difference between insured versus self-insured. Insured sounds like there is an insurance company standing behind them.
Scott: Think about the decision every company makes every year or every two years, how are we going to offer health insurance, are we going to offer health insurance. Well, now after the Affordable Care Act, many of them have to make sure the answer is yes. But how are we going to do that. Broadly speaking there is two ways to do it. You hire an insurance company to provide the insurance. So that is a fully insured plan, you know Anthem, United Health Care, Etna, the big health players. They will provide the plan document. Often times their SPD is the plan document. And that is a fully insured plan and ERISA has a carve out for that to which insurance law applies. So they have to be registered as insurance companies in the state of Ohio and that is going to be where you are looking to case law in Ohio and other states, whatever it may be, on insurance law. But if it is a self-insured plan then those Ohio regulations and cases don’t apply. Then at that point you are looking to ERISA. Often times it can be very confusing because often times the self-insured plans will hire say United Healthcare or whomever to be the back office network. So you might have a client who hands you their health insurance card and it might say United Healthcare but don’t automatically assume that that is a fully insured health plan. That might just be the network that is part of the self-insured ERISA plan. You need to get the plan document. Companies are increasingly going self-insured because of the cost of hiring a fully insured plan. I’m increasingly seeing self-insured plans where they are saying that they will pay for the first $10, $20, $30,000 in benefits and there will be what guys like me call stop-loss insurance after the $10 or $20 or whatever the limit that’s been set. Those are ERISA plans as well and that is insurance that falls within ERISA. So even if there is an insurance company paying the bill, even if your card says United Healthcare, it might be an ERISA plan. The easiest way to solve all of that, to figure it out, is get a copy of the plan document, the SPD, and the annual statement and figure out if it is a full insured plan or a self-insured plan.
Sean: If we are looking at the summary plan description, what is it that we are looking for that will tell us whether it is self-inured or fully insured?
Scott: Usually it says self-insured in the title.
Sean: Oh, I see.
Scott: It can sometimes be patently obvious. Other times it will say how it is providing benefits. And the benefits schedule that may be attached to the plan will talk about how it is self-insured up to certain level and then there is a number. So, everyone listening in to this is somewhat familiar I would imagine with reading insurance policy. It’s similar in this context, even if it’s an ERISA plan. But like I said, sometimes it is patently obvious. It will say “The Self-Insured Plan” blank company. But even if it doesn’t, the statement of benefits or the fee schedule can often tell you who is paying the bill and whether or not it is self-insured or not.
Sean: And does it tend to be larger companies or larger employers who go self-insured?
Scott: Yes, I mean that is a rule of thumb that is still applicable. But I am increasingly seeing mid-sized companies are self-insured simply because of the cost issues. I’m not sure if those are necessarily the right decisions. I mean you’re seeing midsized companies really getting squeezed in the sense that they’ve got this Affordable Care Act mandate, they are well over the 50 employee mandate, they know they’ve got to offer health insurance but the market is still very expensive. One way to manage that is to go self-insured. So you are increasingly seeing small and midsized companies do it. But as a rule of thumb, it is usually a large employer but not always.
Sean: Now, the way that most personal injury practitioners end up facing of dealing with an ERSIA policy is when it comes to subrogation.
Sean: ERISA carriers, again rule of thumb, tend to be the most difficult to deal with from our perspective.
Sean: Do you end up getting involved on the subrogation side and what do you see?
Scott: Yeah I do and often times it is a contentious issue because there have been a number of US Supreme Court cases that have dealt with this issue. It is a recurring subject and there is a lot of passion on both sides of the ledger on that. I think from the plaintiff’s perspective there is this notion that until their client is made whole, why are they reimbursing anything? And there is a lot of sympathy on that side of the ledger. There is a particularly memorable case that came out in 2013, the US Airways case, where the person was very severally injured by a drunk driver and have $66,000 of medical benefits that needed to be reimbursed, the plan was making a reimbursement claim. The drunk driver didn’t have a lot of insurance and when the claim was all done the injured person received $110,000 and who you netted out the fees and the costs and everything he had $66,000. So if he had to pay the reimbursement he essentially wouldn’t get anything. The flip side of this, is that these are often very big plans and very big companies. And so you are not talking about a handful of tort claims that may come through in a year. You are talking companies with 5, 10, 15, 20,000 employees who may have 200 different issues in a year. Don’t forget, they’ve all got kids and spouses who are all covered within those plans. In a recent case, it’s called ERIC, the ERISA Industry Committee filed a brief that talked about reimbursement of subrogation as a billion dollar industry. There is a billion dollars of reimbursement every year. So it is a lot of money and it is a lot of money that the plaintiff’s bar may scoff at, it is a lot of money that is being setoff against the benefits that are being paid out of these self-insured plans. And that is really the tension. Where you have on the one hand you know everyone wishes that the plaintiff was 100% insured and was covered and back to where they were before the injury but on the other hand you have, essentially through no fault of the plan, someone who they had to cover and who can set off a billion dollars’ worth of loses in the aggregate on average. That’s the tension.
Sean: I know that the made whole argument is at least in the 6th circuit governed by the language, right? If they opt out of the make whole they are generally left without.
Scott: Yeah, that is what the US Airways case was about. It is an US Supreme Court case from 2013 that says that you basically look to the plan. So for the big plans, for the most part, are writing language that opts them out of make whole, that opts them out of sharing on a common fund or an attorney fee provision, is including rock-solid language about reimbursements. It really takes us back to what we were talking about a couple of minutes ago, Sean. You’ve got to read the plan. So much of this is going to be driven by what the plan says. But yeah, you’ve got all of those provisions in it and you are going to be looking to the plan, after US Airways, to figure out whether or not you have any of those caveats. Because if it doesn’t say make whole or it doesn’t say common fund, you have those arguments. If a lawyer has taken the time to draft it, which most plans have gotten around to doing, it is going to opt out of all of those things.
Sean: How about a situation, and I’ve tried this approach I don’t know if you’ve seen this from the employer’s side, but I’ve said to whoever is representing the ERISA carrier that based on the amount of the billable insurance and your lien you may be contractually entitled to the full amount but since my client has the power to settle the claim, and I’m essentially acting as the recovery collection lawyer, based on the current break down my client doesn’t want to settle. So therefore, in deciding whether to reduce or negotiate on your lien you have some control, and input, and power on whether you get anything at all.
Scott: Well and that is a very smart way to think about these things because that is essentially the other tension that is going on here. If you are like that person in the US Airways case and you were going to net out $66,000 and the reimbursement claim is $66,000 why would anybody bring the case at all. That is the other tension that is going on here. That if you push the reimbursement claim to the end, it is essentially like tort reform because you are essentially looking at only the big claims that are going to go forward because it is not economically viable to bring a smaller or midsize claim. So that is really that tension there. We are recording this on the 21st of January and yesterday the US Supreme Court came out with the latest decision in this area of the law, the Montanile case. Montanile further adds to that tension because it seems like a plaintiff win and it is.
Sean: Wait, this is the United States Supreme Court.
Scott: It is.
Sean: Plaintiff win?
Scott: Justice Thomas authored the opinion. ERISA is a world that flips the conservative liberal dichotomy on its head. Essentially in this case Justice Ginsberg writes a dissent that would allow for the reimbursement claim because she thinks that the statutory analysis has essentially gone askew and has been wrong for 13, 14 years now. It is an area of the law that I think that the US Supreme Court eyes glaze over a little bit as well. It is not a traditional conservative liberal split. Montanile is a case about a lawyer who disputed the validity of the reimbursement claim and then sent a letter that said “If you don’t sue us in 14 days I am going to disperse the money and that will be the end of it.” He didn’t get sued in 14 days so he dispersed the money. Six months later the plan came back and sued and what the Supreme Court said was the money is gone and to the extent that you have untraceable funds. That claim is not a valid claim under ERISA at section 1132(A)(3). So you have Justice Thomas and all of the conservatives and most of the liberal wing all agreeing with a decision that has a plaintiff who sent a letter that basically said sue me in 14 days or I’m going to spend the money and he didn’t get sued in 14 days so he spent the money and he gets to keep the money.
Sean: Well wonders never cease.
Scott: Right, but the flip side of that is I think that if you read that case and you are on the plan side you are going to be much more aggressive in file an impleading in the personal injury claims, filing separate claims to preserve their rights so that the money doesn’t get dispersed if they don’t get around to filing the lawsuit in 14 days. It is certainly a battle that has been won by the tort bar in Montanile, but I don’t know if you win the war that way. You’re already seeing impleader claims. I’m sure that some of the people listening here are up to their eyeballs in dealing with a three headed monster kind of case, where they’ve got the PI case on the one hand and the reimbursement claim on the other with an impleaded party. I think you are going to see more of that after Montanile because if the plans don’t, they are going to be losing out on the dispersement. Which again, could very well impact the types of personal injury cases that you are seeing that are going to come down the pipeline. It remains to be seen whether or not they are really going to go to that effort if it’s say a $20, $30, $40,000 personal injury case. Maybe some plans will, maybe some plans won’t. But that is yet to be determined as this all rolls forward. It’s certainly an evolving area of the law.
Sean: Stay tuned.
Scott: Right, well and then the other aspect of it is, there is a case that your listeners are all too familiar with, the Longaberger case out of the 6th circuit, says that the lawyers can be sued if they fail to disperse the funds. So they can basically have their attorneys’ fee attached to pay for the reimbursement. Longaberger is a case that has an issue that Montanile overruled. So if your listeners look up the case you are going to see a red flag. But don’t be deceived, it overturned the tracing issue that is an issue in Montanile. But it does not overturn, it does not speak to the attorney fee can be personally liable and have to give the attorney fee back to satisfy the reimbursement claim. That aspect of Longaberger has not been overruled. It’s just a briar patch. You are trying to sort out how to deal with the plan and hopefully not get sucked into this three headed monster of litigation, deal with the plans in a way that makes sense for the plans and your client and the financial realities of the case, and at the same time avoid getting sued like the lawyer in the Longaberger case for having to kick back your attorney fee. It can be a real real tricky issue.
Sean: On that note, I am going to transition to one of my favorite parts of the Podcast, we are going to play a little game called five questions. Question number one, other than being a lawyer what is the most interesting job that you’ve ever had?
Scott: That’s a really good question. It’s either when I had a paper route as a kid, because you saw everyone in the neighborhood and some of them were waiting for the paper at 5 o’clock in the morning and some of them were not; you got to meet everyone in the neighborhood and that was very interesting. Not necessarily the most intellectually stimulating job but that was interesting. I worked for three years between college and law school as a recruiter for an IT staffing consulting company that was based in suburban Boston. I went to Boston University and then stuck around for a couple of years before coming back to go to Ohio State. So I was working as a recruiter and you saw a lot of interesting things. You saw normal situations, you saw employees do everything under the sun both good and bad, that was very interesting. You learned a lot about people and employment law and a lot of different areas in that job. So one or the other. Probably the recruiting job, but I saw a lot of interesting things and learned a lot just delivering papers as a kid too.
Sean: Question number two, do you have a guilty pleasure when it comes to music? Is there an artist or band that you secretly enjoy that you might not publicly admit to?
Scott: Well I guess it won’t be a secret for long, right. You know I don’t have an iPhone, at least not yet, so I still have one of those click wheel iPods and I have a lot of music that I would be proud to talk about. Bruce Springsteen, I’ve got a whole bunch of Led Zeppelin, and classic rock, a lot of jazz that I listen to in the morning. But I also have a lot of what kids call “EDM” or electronic dance music. I have a lot of playlists from a DJ called Avicii that a lot of people are surprised to know that I have on my iPod. No one pegs me as the ERISA lawyer who listens to Avicii, but it is never the less true.
Sean: Very good, we now have a public record of it.
Scott: That’s right. My wife will be happy that the world now knows that this is some of the music that I listen to.
Sean: Question number three, what did your parents do?
Scott: My father worked for a bank, so he was a laid off and then went to college. He actually graduated from college the year after I did and the year before my brother. He got a criminal justice degree and worked in a court as a probation officer at Shaker Heights Municipal Court. He did that for 15-20 years. So he sort of had two careers, one as an employee of a bank and a second career as a probation officer I was interested in the law long before then, just one of the ways that we are similar. My mother was a nurse who became an executive at the end of her career for a medical billing company, encoding company. She was the director of compliance for a medical billing company before she retired. So medical on the one side and banking and the law on the other.
Sean: Question number four, what was your first car?
Scott: I had my father’s old 1986 Toyota Corolla. He bought a Camry and gave me the Corolla with one caveat. Obviously, don’t get in a wreck and all of those, but the big caveat was that I had to take my brother to and from school. I was playing a lot of sports then, so my parents got out of having to drive me to school and I also had to take my brother. An ’86 Corolla. It was silver and my brother ended up taking it to college. I want to say that it died at about 200,000 miles or something. Ran forever.
Sean: Question number five, is a true or false question, on any given Saturday night we are more likely to find you in the club rather than reading the ERISA statute.
Scott: Probably false, I don’t know that I will be reading ERISA on a Saturday night but I won’t be at a club. I’ll probably be watching some sort of sporting event. I’ll be at a Blue Jackets game or an Ohio State football game, or a basketball game, so maybe a Cavs game or OSU game or something. Or maybe getting ready to go to a Browns game. But no, it’s probably something to do with a sporting event. Not a bar or night club.
Sean: EDM club?
Scott: It will probably not be that. I’ve outgrown the club scene. Better for everybody, including my hips and ankles. But probably not reading ERISA.
Sean: Very good. Scott Stitt thank you very much for joining us today.
Scott: Great, thank you for having me.