Informed by a customer-service representative for an employer health plan that surgery to reduce her acid reflux was approved, Deborah Kenseth went ahead with the procedure. But administrators of the plan ultimately denied coverage. Stuck with $77,000 in bills she didn't expect to pay, Kenseth sued Dean Health Plan, claiming violations of state and federal laws.
This all-too-common workplace scenario gave the Seventh Circuit Court of Appeals the opportunity to refer to a recent U.S. Supreme Court decision in CignaCorp v. Amara.
The Seventh Circuit held that Cigna "substantially changes our understanding of the equitable relief available" under the Employee Retirement Income Security Act of 1974, and expands judicial options for remedies, including monetary relief.
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Employment attorneys throughout the country are weighing in on Kenseth v. Dean Health Plan Inc., and many have concluded in blogs and commentary that this case and others similar to it represent a substantial detour from decades of legal decisions prior to Cigna, where courts had decided employees could not recover for misrepresentations by employers over benefit coverage if the plan terms were clear.
Benefits managers should take note that as a result of the Kenseth case, employees who can show the terms of their plan were unclear – and were told coverage would be available and then were denied coverage after treatment – may now be able to collect monetary relief on their claim.
Kenseth must still prove actual harm before the district court determines whether a surcharge is available in this case. To obtain a surcharge, Kenseth must demonstrate that Dean breached its fiduciary duty to her and that the breach caused her damages.
Employment attorneys at the international firm of McDermott, Will & Emery suggest in their blog about the case that employers seeking to avoid a similar result in administering their benefit plans should:
- Review plan documents and ensure clarity.
- Review and confirm that the human resources personnel communicating with plan participants and beneficiaries are receiving adequate training and providing accurate information.
- Advise plan participants and beneficiaries in the summary plan description that they cannot rely on any representation regarding coverage unless it is from an authorized person and in writing.
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