DOL and Unum Ink Settlement Involving ERISA-Covered Life Insurance Benefits With a Message to Policyholders

On June 11, 2024, the U.S. Department of Labor (DOL) announced a settlement with Unum Life Insurance Co. of America (Unum) that requires the insurer to change how it administers its "proof of good health" requirement — referred to as evidence of insurability (EOI) — for participants in ERISA-covered life insurance plans. EOI may be required when employees elect to purchase supplemental coverage through their workplace plans or elect coverage outside of specific enrollment periods for those plans. This is one of a growing number of DOL settlements with insurers related to the handling and timeliness of EOI.

Although no DOL lawsuit was filed, the Secretary of Labor alleged in the settlement agreement that Unum accepted premiums for coverage under plans that required EOI — but without timely determining participants' eligibility for coverage — and then denied claims on the basis that Unum lacked EOI. In a press release announcing the settlement, DOL stated that this meant Unum "often accepted premiums without verifying if participants were insurable, leaving participants and their beneficiaries to believe they had coverage." 

Separately, the Secretary alleged that Unum provided coverage to dependents in certain policies, but if the dependent died within two years of the policy's issuance, Unum reviewed whether the dependent was disabled from the time of enrollment until their death, and if Unum found the dependent was disabled at the time of enrollment, it would then deny coverage citing a delayed effective date of coverage. According to DOL's press release, Unum "did not clearly inform participants or dependents at enrollment that coverage would be delayed in these circumstances." 

In the settlement agreement, the Secretary alleged that Unum was a fiduciary under ERISA and therefore had a duty to ensure that eligibility determinations for coverage requiring EOI were "made at or near the time Unum receives premiums for such coverage." Further, the Secretary asserted that Unum violated ERISA Title I "by accepting premiums for coverage requiring EOI without timely determining the participant's eligibility, and then denying claims on the basis that Unum lacked EOI." In the settlement, Unum neither admitted nor denied that it is an ERISA fiduciary or that it failed to discharge its fiduciary duties, if any, under Title I.

Under the terms of the settlement agreement, Unum cannot deny benefits claims under an ERISA-governed group life insurance policy solely because of a lack of EOI when a plan participant has paid premiums for 90 days or more. If Unum denies coverage based on lack of EOI and has received premiums for less than 90 days, then Unum must refund the premiums. In addition, Unum must make changes to its policy addressing delayed effective date of coverage and make it more transparent to participants and policyholders. 

Employers and plan administrators should take note that under the settlement, Unum must also give notice to current and future ERISA-governed group life insurance policyholders that:

• The policyholder must not collect premiums from any employee for coverage applicable to an employee or an employee's eligible dependent, where the group policy requires submission of EOI for such coverage, until the policyholder first confirms that Unum has approved EOI for the employee and/or the employer's eligible dependent. 
• In the event the policyholder collects premiums from any employee for coverage requiring EOI without first confirming that Unum has received and approved the required EOI, the policyholder may be liable to the beneficiaries of any such employee or the employee's eligible dependent.

These provisions in the settlement agreement signal DOL's position that plan fiduciaries who fail to properly manage EOI may in certain circumstances face ERISA liability when claims are denied for lack of EOI.

In its press release, DOL stated that Unum will voluntarily re-process claims denied based on lack of EOI from January 1, 2018, to the present and claims denied based on the delayed-effective-date provision from July 1, 2016, to the present. The press release references similar settlements DOL reached with Prudential Insurance Co. in April 2023, United of Omaha Life Insurance Co. in September 2023, and Lincoln National Life Insurance Co. in May 2024. No information is publicly available regarding the Lincoln National settlement.

Court Dismisses Air Ambulance Providers' Suit Seeking Collection of NSA IDR Award

On May 30, 2024, a federal district court in Texas dismissed a complaint filed by two air ambulance providers against Health Care Services Corporation (HCSC) seeking payment of awards issued through the No Surprises Act (NSA) Independent Dispute Resolution (IDR) process. Guardian Flight LLC v. Health Care Serv. Corp., No. 23-cv-1861, (N.D. Tex. May 30, 2024). The air ambulance providers alleged three counts against HCSC: 

1. Failure to timely pay the awards under the NSA
2. Failure to pay benefits under ERISA § 502(a)(1)(B)
3. Unjust enrichment 

As to the first count, the district court, having determined that the NSA does not contain an express private right of action enabling a party to file a lawsuit seeking to enforce an IDR award, considered whether the NSA contains an implied private cause of action. The court held that the NSA does not create such a right:

While the NSA appears to create a right that out-of-network providers are entitled to recover their IDR awards within thirty days, these provisions, when read together, do not suggest that Congress intended to create a procedural mechanism for providers to convert IDR awards to final judgments. Further, there is no other language in the statute suggesting that Congress contemplated providers would be able to file a lawsuit to enforce IDR awards. In other words, these provisions only suggest that Congress created a right, but there is nothing to suggest that Congress also intended to confer a corresponding remedy.

The court refused to create a private right of action when Congress did not do so and held that the providers could not state a viable claim under the NSA.

As to the second count alleging a failure to pay benefits, the court dismissed the claim based on a lack of Article III standing. Although the providers alleged they were asserting the right to benefits of some of HCSC's beneficiaries, the court found that the HCSC beneficiaries did not suffer a concrete injury as a result of HCSC's alleged failure to pay the IDR awards. According to the court, because the passage of the NSA means that patients, like the HCSC beneficiaries, are no longer financially responsible for balance billing, "[t]he HCSC beneficiaries would incur no financial injury from a dispute between HCSC and Plaintiffs because the beneficiaries do not have to pay the IDR awards."

On the third count, the court noted that under Texas law unjust enrichment is not an independent cause of action and construed this claim as one for quantum meruit. Quantum meruit claims in Texas have four elements: (1) valuable services were rendered or materials furnished; (2) for the defendant; (3) the services or materials were accepted by the defendant; and (4) the defendant was reasonably notified that the plaintiff performing the services or providing the materials was expecting to be paid. According to the court, the complaint failed to state a claim for quantum meruit because HCSC did not benefit from the air ambulance services at issue and the providers did not perform any services for HCSC. "Healthcare providers generally cannot maintain a quantum meruit claim against health insurance companies based on allegations that the providers performed services solely for the health insurance companies' insureds."

In addition to dismissing the complaint in its entirety, the court also denied the providers' request to amend their complaint on all counts. An appeal is anticipated.

This case contrasts with another case decided last September in the District of New Jersey, brought by an out-of-network medical practice seeking to invalidate a $408 IDR award related to emergency plastic surgery services. GPS of New Jersey M.D., P.C. A/S/O/ T.U. v. Horizon Blue Cross & Blue Shield, No. 22-cv-06614 (D.N.J. Sept. 8, 2023). In that case, the defendant-insurer filed a cross-motion to confirm the IDR award under the Federal Arbitration Act (FAA), which the court granted, even though the NSA does not contain any provisions related to enforcement of IDR awards. The NSA's only provisions addressing judicial review of IDR awards incorporate FAA § 10(a), 9 U.S.C. § 10(a), which allows a court to vacate an award when a party demonstrates the arbitration process involved fraud, corruption, or similar misconduct.  

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