Recently, the Supreme Court ruled that an ERISA plan cannot sue to recover medical expenses paid after settlement funds have been completely paid out. In this article, we will attempt to demystify this decision which protects hospitals overpayment recoupment from health plans.

Last week, the Supreme Court made a ruling regarding ERISA plans. The intent behind the decision is as follows. Ordinarily plaintiffs cannot enforce equitable liens if the defendant had a separate, identifiable fund attached to the lien, but then spent all the funds involved. This rule usually applied to equitable liens formed by agreement as well as other types of equitable liens.

In this case, the ruling was based upon an 8-1 ruling that was penned by Justice Clarence Thomas. In court documents, the majority stated that the National Elevator Industry Health Benefit Plan couldn’t sue plan beneficiary Robert Montanile under ERISA §502(a)(3) for overpayment reimbursement of about $122,000 from a $500,000 auto accident settlement because the settlement fund had already been completely spent. Moreover, the plan fiduciary could also not sue to access at the plan participant’s personal assets.

The case, Robert Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan. In this case, payment was ordered by a Federal Bankruptcy Court for a bankrupt hospital system in Texas. According to Dr. Jin Zhou, president of ERISAclaim.com, “More than billions of dollars in revenue losses, or even bankruptcies, for hospitals and doctors nationwide in the past 10 years are directly resulted from all types of overpayment offset and recoupment by payers under ERISA equitable lien arguments, inside or outside of courtrooms, this Supreme Court decision is extremely timely and most important for every health care provider’s financial survival.”

After the decision, all overpayment offset or recoupment across ERISA plans are not permissible under equitable lien law because such liens are attached to personal funds or property and not the ERISA itself. “For all pending overpayment court cases in the absence of any fraud claims, this Supreme Court decision could be a rainmaker for all healthcare providers, both in-network and out-of-network, ” Dr. Zhou predicted.

It is expected that many of the major health related companies will now begin brainstorming on this recent Supreme Court decision. This is needed to assist in assessing compliance and advocating for ERISA rights of the plan participants. As a matter of course, there are major concerns that beneficiaries, hospitals, and doctors are being forced into major financial problems because of extreme revenue losses from excessive overpayment recoupment or offsets under ERISA plans.

According to related documents from the Supreme Court, “[A]s here, an equitable lien by agreement, only against specifically identified funds that remained in the defendant’s possession or against traceable items that the defendant purchased with the funds. If a defendant dissipated the entire fund on nontraceable items, the lien was eliminated and the plaintiff could not attach the defendant’s general assets instead.”
“In sum, at equity, a plaintiff ordinarily could not enforce any type of equitable lien if the defendant once possessed a separate, identifiable fund to which the lien attached, but then dissipated it all. The plaintiff could not attach the defendant’s general assets instead because those assets were not part of the specific thing to which the lien attached.”

All in all, this case looks to be beneficial for individual plan participants, but it sure to impact costs for plans in the future as they have to absorb associated costs that can no longer be obtained from personal assets of plan participants. This could ultimately mean higher costs for plan participants or the elimination of key programs that can no longer afford the cost of program funding.

Contact J. Price McNamara Today For Your ERISA Questions

ERISA law can be extremely complicated and the results of your case could mean significant changes for you and your family in retirement. You should know that only an attorney with knowledge of the appropriate ERISA laws can help you get you the outcome you deserve for your case. J. Price McNamara has been practicing law for many years and has handled many cases just like yours. Call us today to schedule your free ERISA case review and get an experienced team on your side.