Supreme Court Decides MetLife v. Glenn in Insured’s Favor
by Ron E. Peck, Esq.
The matter of administrative discretionary authority, when administering a health benefits plan within the purview of ERISA, and the deference federal courts must show to such discretion, has been the new hot topic in ERISA ever since subrogation rights were affirmed by the Sereboff case. The Supreme Court first stated that health plan administrators, who assert discretionary authority to administer a plan within the plan’s document, are due deference in Firestone Tire and Rubber Co. v. Bruch. Afterward, federal courts could overturn administrator benefit determinations only if they find that the administrator has abused its discretion (an arbitrary and capricious standard of review).
While many have tried to chip away at the deference shown to administrators over the past twenty years, few have succeeded in overcoming the ultra-deferential standard of review. As a result, plan administrators have rarely had their decisions overturned, so long as those decisions have some evidence to substantiate them (and are thus not arbitrary or capricious). One basis for questioning administrative decisions that has been raised repeatedly over the past two decades relates to administrators with conflicts of interest – a personal stake in how the claim(s) are processed. In MetLife Insurance Co. v. Glenn, Metro. Life Ins. Co. v. Glenn, 2008 U.S. LEXIS 5030 (U.S. June 19, 2008) the questions that flow from the conflict of interest issue were addressed by the Supreme Court. The Court began by asking: what constitutes a conflict and is such a conflict created when the same company both administers and funds a benefit plan, and when such a conflict does exist how is it to be factored into a court’s review of an administrator’s denial of benefits?
The story began when Glenn brought an ERISA claim against MetLife in 2002, alleging that the company had wrongfully denied her benefits. MetLife both processed claims they receive and pay the claims with their own funds.
MetLife had denied Glenn’s claims based upon an analysis of records by their own expert, and select documents produced by Glenn’s own doctor; referring to a report in which Glenn’s doctor had deemed Glenn physically capable of performing sedentary work. The district court ruled against Glenn, finding that MetLife had thus not abused its discretion. Glenn appealed.
The court of appeals overturned MetLife’s decision. Before considering what MetLife based its decision upon, compared to other evidence available to the administrator, the court expressed concerns that MetLife – both as plan sponsor and administrator – was operating under a conflict of interest that would have to be “weighed” when considering the administrator’s procedures.
The court discovered that MetLife had never addressed numerous letters from Glenn’s doctor stating explicitly that Glenn could not withstand the emotional stress of even sedentary work. Likewise, MetLife did not address a ruling by the Social Security Administration that Glenn was completely disabled.
The court reasoned that while MetLife’s decision was based upon some evidence, when weighed against the evidence contrary to their decision and in light of the conflict of interest, their decision could not stand.
MetLife appealed the decision to the Supreme Court. There, MetLife argued that MetLife’s administration of claims is unlikely to be affected by the company’s concurrent obligation to pay benefits because of “the realities of the insurance business.” Furthermore, MetLife claimed to have strong business incentives to serve as a fair administrator and that the financial incentive for MetLife to deny claims to avoid having to pay benefits is less than it seems. Indeed, MetLife argued that like all insurance carriers, the company structured its business in anticipation of having to pay benefits. Finally, because claim decisions are made by salaried employees who “do not have direct personal stakes in the outcome of their decisions, MetLife failed to recognize the “conflict of interest” that swayed the court from a deferential review of their benefits determination.
According to Glenn, MetLife acted under “an obvious conflict of interest.” Every claim that MetLife denied represented payments that MetLife would not have to make. Furthermore, there are documented cases of other insurers adopting a practice of denying payable claims for the purpose of enhancing profits.
The Supreme Court ruled on June 19 in favor of Glenn, affirming the Court of Appeals’ decision. Their ruling makes it clear that a company which both administers and funds a benefit plan operates under a conflict of interest that must be considered as a factor in a court’s review of claim denials. The question now, of course, is how much weight will such a conflict have (enough to counter deference entirely, sway a court only if there is no rationale for the administrator’s decision, or somewhere in between)? Would a conflict of interest change the standard of review, or be a “tie breaker” when evidence could equally support or counter the administrator’s decision.
According to the Supreme Court’s majority opinion, the court of appeals properly “weighed” the conflict of interest “as a factor determining whether there was an abuse of discretion.”
The Court went on to say that there should still be a “deferential standard of review”; that the presence of a conflict of interest does not automatically authorize a court to apply heightened scrutiny to a claim denial normally analyzed only for an abuse of discretion. Instead, the conflict simply ranks as “but one factor among many that a reviewing judge must take into account.”
Once the court decides the relative importance of the conflict of interest, it must examine the evidence substantiating the administrative decision. If these factors, viewed deferentially, still result in a “close balance” for and against the decision, or fail to adequately support the decision even when looked at deferentially and leaving the court uncertain as to whether the claim denial was reasonable, the conflict of interest may serve as a “tiebreaker.”
As if this new test wasn’t vague enough, conflicts of interest – according to the Court – are assigned “weights.” The weight is the relative importance of the conflict of interest in the particular case. If the conflict seems more important or seems to have a direct impact on the decision, the court needs to be more searching when considering evidence contrary to the administrator’s decision. If the conflict seems to have little impact on the decision, the court will apply what almost seems like a classic deferential review.
Unlike the majority, that assigns a weight to all conflicts, the Chief Justice Roberts wrote that he would only give a conflict of interest weight if circumstances demonstrated that the conflict had actually influenced the claim denial in question.
In dissent, Justice Scalia and Justice Thomas criticized the holding as creating a vague test with no applicability. An administrator’s conflict of interest, they wrote, should not be weighed at all unless the administrator could first be shown to have had an improper motive during the process.
Federal Courts are already using the Glenn decision to rationalize their straying from a strict deferential review of ERISA Plan administrator denials. For instance, in the Ninth Circuit, a district court has used the Glenn decision to substantiate the Ninth Circuit’s holding in Abatie v. Alta Health & Life Ins. Co., 458 F.3d 955 (9th Cir. 2006), as applied in their own holding in the case of Hoskins v. Bayer Corp., 2008 U.S. Dist. LEXIS 48791, 10-11 (N.D. Cal. June 25, 2008).
In Abatie, the Ninth Circuit held that where “the wording of the Plan confers discretion on the Plan administrator” and “the Plan administrator has a conflict of interest,” an “abuse of discretion review, tempered by skepticism commensurate with the Plan administrator’s conflict of interest, applies.”
How does this decision impact administrators? Plan administrators must act preemptively to “lessen the weight” of any potential conflicts. Take steps now to reduce bias, remove the potential for self-serving by denying claims, separate the source of funding from the claims administrator, and enforce the Plan in strict accordance with the terms of the Plan Document.
Cites:
Roy F. Harmon III – http://healthplanlaw.com/
Supreme Court of the United States WIKI (SCOTUS) – http://www.scotuswiki.com/index.php?title=MetLife_v._Glenn
Do you know a Texas atty that has a back bone to deal with MetLife? My case is similiar to Ms. Glenn’s.
Do you know who the attys were that represented Ms. Glenn?