Wanda Glenn contested the denial of her health care claim arising from an ERISA gov­erned welfare plan. The District Court held in her favor; the Federal Appeals Court reversed. In Mid-June 2008, the Supreme Court ruled in her favor in what will prove to be a momentous design.  In brief, the court held in a 6- 3 decision that the conflicted interest that exists whenever the claims adjudicator and the claims financier are the same must be used as a factor requiring the higher standard of review rule and denying the application of the more lenient abuse of discretion rule. This principle was enunciated in the Supreme Court decision Firestone v. Bruch.

This means that any claim contested in court, upon review will confer a sig­nificant advantage to the arrangement where the claims are adjudicated by an independent third party and paid by an independent payer (insurer, employer, e.g.).  Also, this means that a significant disadvantage will be conferred where the claims are both adjudicated and paid by the same two parties (employer’s self­ administered and self-funded plan, full insured or ASO arrangements, e.g.).

It is the opinion of this writer that the added legal burden on the payer of having to go to court with one hand tied behind its back whenever there is a claim in contest will be too great for most plan sponsors to be willing to bear. Presuming my opinion is correct, we can expect an immediate and significant shift from fully insured and ASO arrangement to TPA-administered self-funded health care plans where conflicted interest does not exist.

This is first few paragraphs of an article by Carlton Harker which was published in the August 2008 issue of The Self-Insurer, page 10.