Supreme Court to Hear Arguments Involving a Health Plan’s Right to Recover Plan Overpayments
While public attention is currently focused on the upcoming high profile Supreme Court decision in King v. Burwell (which involves subsidies for exchange-based coverage under the ACA), the Supreme Court recently decided to hear arguments in a separate employee benefits case that involves an ERISA plan’s ability to recover overpaid amounts that are no longer in the plan participant’s or beneficiary’s possession.
Montanile v. Bd. of Trs. of Nat’l Elevator Industry Health Benefit Plan involves a group health plan’s attempt to recover the monetary proceeds that a plan participant received as part of an out-of-court settlement for injuries stemming from a car accident, pursuant to the plan’s subrogation provisions. The plan sought to recover the settlement amounts attributable to the participant’s health costs even though the participant had already spent the settlement proceeds. Although similar subrogation-related issues have been litigated and resolved by the U.S. Supreme Court over the past several years, the specific issue that the Supreme Court will decide in Montanile is whether ERISA Section 502(a)(3)’s equitable remedies provision allows a plan to recover overpaid amounts that are no longer in the possession of the plan participant or beneficiary.
The Supreme Court likely accepted the case because the federal circuit courts are currently split on this issue. The majority of circuit courts that have considered the issue (including the Seventh Circuit in Illinois, Indiana, and Wisconsin) allow plans to recover in spite of the fact that the participant or beneficiary no longer possesses the amounts at issue, and a minority of circuit courts do not allow plans to recover where the amounts at issue are no longer in the participant’s or beneficiary’s possession. Arguments in Montanile will take place during the Court’s 2015-16 term.