In US Airways, Inc. v. McCutchen, No. 10-3836, decided November 16, 2011, the Third Circuit Court vacated a district court decision (Western District of Pennsylvania), which ordered 100% reimbursement to US Airways (a self-funded ERISA plan). The Third Circuit also remanded the case to fashion “appropriate equitable relief.” This ruling is based on statutory language which states that an ERISA plan’s rights to enforce its plan terms is governed by ERISA’s § 502(a)(3), which limits the available relief to an injunction or “other appropriate equitable relief.” The court ultimately found that Congress intended to limit this relief through the application of equitable defenses and principles.
The Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for pension plans in private industry. Many medical insurance plans paid by or in part by an employer are ERISA plans regulated under the Department of Labor’s federal laws. In all ERISA medical insurance plans, there is language that states the right of full recovery of all accident medical expenses paid at the time the injured parties receives any third-party recovery or settlement.
Since the United States Supreme Court decision of Sereboff v. Mid-Atlantic Medical Services, Inc., 547 US 356 (2006), there has been much debate regarding the scope of an ERISA reimbursement claim. The US Airways decision offers a new lien resolution framework in personal injury claims that involve accident-related medical expense payments from an ERISA plan. The Third Circuit took this position based on Congress’ intention that equitable consideration be taken into account when considering the reimbursement claims of ERISA plans. Although these reimbursement claims are defined in ERISA contractual plan language, the Court found that adequate consideration be given to the facts of the case and not solely based upon whether or not the ERISA plan is “justly” enriched or reimbursed.
The US Airways decision concludes that in applying equitable principles of recovery, settling parties should strongly consider the need to take into account procurement costs, perhaps in the same manner that Medicare and Medicaid recovery contractors do, regardless of plan language.