The United States
Court of Appeals for the Seventh Circuit recently reviewed whether a
self-funded group health plan was entitled to recoup erroneous
payments it made to a hospital for a patient's treatment expenses
when it discovered that the patient was not covered by the plan. In
deciding Kolbe & Kolbe Welfare Plan v. Medical College of
Wisconsin, the Seventh Circuit ruled that the health plan could
not recover the payments.
An employee who
participated in his employer's self-funded group health plan had a
daughter in 2007. The employee submitted an enrollment form to have
his newborn daughter covered by the plan.
subsequently determined that the employee's enrollment form was
incomplete and failed to provide certain information needed to
determine the daughter's eligibility for enrollment. The employer
requested additional information without success, and eventually
denied enrollment status to the daughter in 2008. In the interim, the
daughter had received over $1.7 million in medical treatment, all of
which was paid for by the plan.
After denying the
daughter's enrollment, the employer asked the hospital to refund the
money it had paid for the daughter's treatment. When the hospital
refused, the employer sued to recover the payments.
asserted that ERISA allows a plan fiduciary to bring an equitable
claim to enforce the terms of the plan, and that in filing the
lawsuit, the employer sought to enforce the plan's overpayment
provision, which provided for the recovery of payments made in error.
The plan's overpayment provisions, however, limited the source of
recovery to "covered persons." The district court
dismissed the plan's ERISA claim, ruling that neither the hospital,
which provided medical services, nor the employee's daughter, who was
denied enrollment in the plan, were "covered persons." The
employer then appealed to the Seventh Circuit.
the facts of the case, the Seventh Circuit upheld the decision. The
Court noted that it took the employer over 11 months to figure out
that the daughter was ineligible for plan coverage. It then ruled
that it was not the hospital's responsibility to refund the money
simply because the plan sponsor failed to keep its records straight.