Supreme Court ERISA decision calls for immediate response to settlement

In January, the Supreme Court made a major ruling that could affect health care plans across the country. In the case "Montanile v. Board of Trustees of National Elevator Industry Health Benefit Plan," the court decided Robert Montanile – who received a settlement after being injured by a drunk driver and spent the money on everyday living expenses, such as legal fees and caring for his family – did not have to reimburse his health plan even though it had a first-priority claim to the settlement funds.

This decision will now stand for similar situations in the future. If the plan is covered by the Employee Retirement Income Act and the location of settlement funds can not be identified, the plan participant will not be held accountable for repaying those expenses. The outcome was the result of an 8-1 vote, with only Justice Ruth Bader Ginsburg against the outcome, calling it a "bizarre conclusion."

"He can escape that reimbursement obligation, the Court decides, by spending the settlement funds rapidly on nontraceable items," Ginsburg stated, affirming her opinion that future plan participants will take the same course of action to evade paying back their health plan.

"Immediate filing of suit is necessary for plan reimbursement."

Next steps for HR
The Supreme Court decision could have a costly outcome on employer-provided health plans. If plan participants aren't required to repay their expenses, companies may never see reimbursement.

The high court made its decision based on the timeline describing the plan's call for reimbursement. If the suit had been immediate, retribution would have probably been necessary. However, since the plan waited until after the participant had already spent some of the money, the claim was no longer relevant.

To avoid a similar situation, companies and their human resources teams should make their claim and file suit immediately after a settlement is reached, according to HansonBridgett. The faster action is taken, the less time participants have to spend the funds on other expenses.