United States District Court, Western District of Michigan; Docket No. 1:92-CV-170;
Honorable Robert Holmes Bell; Unpublished
Official Federal Reporter Citation: Not Applicable; Link to Opinion
Employee Retirement Income Security Act (ERISA – 29 USC Section 1001, et seq.)
No-Fault Insurer Claims for Reimbursement
In this written Opinion, Judge Robert Holmes Bell held that a coordinated no-fault insurer could not seek reimbursement for medical expenses it paid from a "stop loss" insurance policy issued to an ERISA participating employer to reimburse the employer for the amount of covered medical expenses above a certain deductible that the employer has paid for persons covered under the plan.
Plaintiff Auto Club was the subrogee of an employee whose medical expenses were paid by the self-funded plan. When those expenses exceeded a specific level, the employer was then entitled to be reimbursed by stop loss insurance it had purchased from defendant Safeco. Auto Club acknowledged that under recent authorities, the ERISA statute preempts any state law claims that the employee and Auto Club, as her subrogee, would have against the self-funded plan. However, Auto Club claimed that pursuant to ERISA's "saving clause" it continues to have a viable state law claim against Safeco, who is an insurance company regulated by Michigan state law. Judge Bell rejected AAA's theory for three reasons.
First, Judge Bell concluded that neither the employee, nor Auto Club as her subrogee, had a contractual claim against Safeco because it was the employer, not the self-funded plan, who was the insured party under the Safeco insurance policy. Judge Bell observed, "The Safeco policy is not a stop loss carrier for the ERISA plan. It insures the employer, the plan's sponsor." He went on to note that the plan is not a party to any insurance contracts, that the Safeco policy insures the employer, and that the Safeco policy reimburses the employer for the amount of covered expenses in excess of the deductible that the employer has paid for persons covered under the applicable ERISA plan. The fact that the Safeco policy refers to and incorporates the self-funded plan is nothing more than the method by which Safeco determines its duty to reimburse the employer. Incorporation of the plan language does not put Safeco in the same position as the self-funded plan, vis-a-vis the plan beneficiaries. Moreover, the employer's stop loss policy is not considered to be an asset of the plan. This is supported by a recent Department of Labor advisory opinion.
Second, Judge Bell ruled that the stop loss insurance policy issued by Safeco is not a policy for health insurance benefits within the meaning of §3109a of the Michigan No-Fault Act. Judge Bell stated that he was aware of no case construing "health and accident coverage" under §3109a to include a stop loss insurance policy. He stated mat the difference between stop loss and health insurance is well recognized. The stop loss coverage does not pay benefits directly to participants. It simply protects self-insurers from risks beyond those which the premiums are based. In addition, there are cases from other circuits holding that stop loss insurance purchased by the plans themselves are not considered to be health insurance and thus beyond the reach of state statutes regulating health insurance. AAA relied upon the case of Michigan United Food and Commercial Workers Union v Baerwaldt, 161 F2d 308 (CA 6,1985). However, this case was overruled by the Supreme Court in the FMC Corporation case, at least to the extent that it dealt with the issue of ERISA preemption. In addition, Judge Bell stated that to the extent Baerwaldt can be read to hold that stop loss coverage is accident health coverage, it has also been overruled by Lincoln Mutual Casualty v Lectron Products, Inc Employees Health Benefit Plan, 970 F2d 206 (CA 6, 1992).
The third reason Judge Bell rejected AAA's claim is because AAA's claim against the ERISA employer's stop loss coverage for benefits due under the plan is preempted by ERISA. AAA's claim against the employer's stop loss insured ignores the fact that neither the employee nor AAA would have a cause of action against the stop loss insurer without the plan. Therefore, the basic essence of the claim is one for benefits payable under the plan and is thus, a claim that arises out of and relates to ERISA benefits. As such, the claim is preempted by ERISA.
Based upon the reasons set forth above, Judge Bell found that Safeco did not have an obligation to reimburse ACIA for medical expenses it paid on behalf of the ERISA employee.