ERISA Doesn't Govern Eligibility Contract Between Employer and HMO

April 27, 2007 (PLANSPONSOR.COM) - The U.S. District of South Carolina ruled a health maintenance organization (HMO) could not sue an employer as a fiduciary under the Employee Retirement Income Security Act (ERISA) for not notifying the HMO that an employee was no longer eligible.

According to the EBIA., Carolina Care Plan – the HMO – paid more than $650,000 in medical claims and continued to pay the premiums for a former employee of Auddie Brown Auto Sales of Florence, Inc., even after the employee had been terminated.

The contract between the Carolina Care and Auddie Brown was such that the company was responsible for checking plan eligibility. Carolina Care sued Auddie Brown in state court, claiming negligence; however, Auddie Brown contended that the suit belonged in federal court.

The federal judge¬†sent the case back to the state court, saying that even though Carolina Care was a fiduciary when deciding claims under the employer’s ERISA plan, it was not a fiduciary when relying on the employer’s certification of eligibility status in paying claims.

The district court further noted that the HMO/employer contract that required the employer to inform Carolina Care about eligibility changes was different from the terms of the employer’s ERISA plan, in that the HMO’s claim against the company would not require the court to interpret the ERISA plan at all.

The case is Carolina Care Plan, Inc. v. Auddie Brown Auto Sales of Florence, Inc, D.N.C. 2007.

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