>US District Judge Robert Miller Jr. of the US District Court for the Northern District of Indiana made the determination after refusing to invalidate the company’s escape clause through federal common law, due the court’s interpretation that “Congress did not intend for the courts to create common law dictating the substance of ERISA plans.” With the ruling, the court granted summary judgment to the employer’s health plan in its cross-claim against the HMO.
>In the case, the HMO had argued allowing escape clauses, such as the one located in the employer plan, is potentially detrimental to HMOs as they would be left to shoulder the burden of covering participants with dual coverage, as was the case in the latest ruling. However, Miller responded that the HMO’s “predictions about the ramifications of today’s decision may be accurate, but those are matters for legislation, not a new direction of federal common law.”
>The case arose following the leukemia diagnosis of Tom Ray Jones in March 2001. At the time, Jones was covered by two ERISA-governed health plans, State Wide Aluminum Inc.’s health plan and Partners National Health Plans of Indiana Inc., an HMO . Following his diagnosis, Jones applied for reimbursement of his medical bills from both plans.
>Initially, Jones’ medical bills were covered under the State Wide plan, but in May of 2001 the plan stopped paying Jones’ medical bills after a review of its escape clause. Jones then applied to the HMO, which began paying the medical bills, but ultimately ceased payments as well. The HMO gave two reasons for stopping further payments:
- a coordination of coverage provision in the HMO plan, and also in State Wide’s that called on the employer’s plan to be the primary payor in the case of dual coverage.
- the HMO believed State Wide’s escape clause to be illegal and unenforceable.
>In August 2002, Jones passed away and his widow – Brenda Lee Jones – filed suit against Statewide and Partners. In her suit, Brenda Jones claimed State Wide’s escape clause was unenforceable, and that the HMO was responsible for coverage, since the HMO had a clause indicating it would pay the amount not covered by the other plan in the case of dual coverage. State Wide and Partners then filed cross-claims against each other regarding the enforceability of the escape clause.
The case isJones v. State Wide Aluminum Inc.,Northern District of Indiana, No. 3:02-CV-228-RM.