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This week in benefits

SPDs, mac & cheese and the top health care reform stories this week.

By James E. Green | Updated on May 20, 2011

Supreme Court: SPDs are not legally binding contracts. In what has been characterized as a “partial victory” for CIGNA, the U.S. Supreme Court remanded CIGNA Corp. v. Amara back to the lower court this week. The case focused upon CIGNA’s 1998 retirement plan conversion from a traditional defined benefit pension plan into a cash balance plan. Employees sued, claiming the summary plan description (SPD) was misleading and that the misleading communication caused them financial harm. According to the decision issued this week, the 27,000 CIGNA employees affected by the plan conversion may be entitled to relief under ERISA rules, but not under the provision applied by the federal court. Myron Rumeld, an employee benefits attorney, explained that the ruling will set a precedent limiting employees’ abilities to seek “equitable relief” based upon their understanding of SPDs, rather than the actual terms of the plan itself.

Health care costs soar in tandem with insurance company profits. According to the annual Milliman Medical Index, 2011 marks the fourth straight year that medical costs have increased by more than 7 percent. The average health care costs for a family of four covered by a PPO plan is now $19,393, up from $18,074 in 2010. Rising medical costs did little to interfere with insurance companies’ expanding profit margins, according to a New York Times story published this week. The Times piece attributes insureds’ profit growth to premium increases – often in the double-digit percentage range – despite low plan utilization rates due to “a lingering recessionary mind-set among Americans who are postponing or foregoing medical care.” The story stirred up a lot of reader hostility directed toward insurance companies.

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