In Cigna v. Amara, the U.S. Supreme Court held that the plan document is the governing document for an ERISA plan and that in a conflict between the plan document and the summary plan description (SPD), the plan document must be enforced. A participant misled by an SPD may be able to bring various claims based on the incorrect SPD; however, enforcement of the SPD itself is not one of them.
Cigna v. Amara involved a pension plan. Pension plans typically have long, complicated plan documents and short, easy to understand SPDs. In contrast, many employers who sponsor welfare benefit plans, such as health plans, do not have formal plan documents separate from the certificate of coverage (for an insured plan) or the SPD (for a self-funded plan). In fact, administrators of self-funded plans are reluctant to develop comprehensive and accurate SPDs for health plans because the exclusions and limitations are difficult to summarize. They prefer providing participants with a single governing document so that there can be no discrepancy in the description of plan benefits between the plan document and the SPD. Thus, in many situations, there is no formal plan document for the SPD to summarize; the SPD provided to the plan participant is the plan document. Since Cigna v. Amara, employers have wondered whether that practice can continue.
In a recent federal district court decision, the court concluded an SPD constitutes the plan document if there is no other plan document. The case involved a health plan participant, injured in a motorcycle accident, whose medical expenses were paid by the carrier for the automobile also involved in the accident. The participant tried to get his employer’s self-funded medical plan also to reimburse him for those expenses, essentially wanting to “double dip.” The plan had no document other than the SPD that described the benefits to the participants and the administrative services contract with the third party administrator which did not describe the benefits. The SPD precluded double dipping; the administrative services contract did not address the issue.
The participant claimed that under Cigna v. Amara, the SPD could not be the plan document and that the plan document therefore had to be the administrative services contract. The federal district court disagreed, stating that if there is only an SPD, then the SPD is the plan document and it can be enforced. The district court said the Supreme Court decision was not inconsistent with that position since in that case, there was both a plan document and a summary plan description. The court noted that if the injured participant had a medical claim he wanted covered under the plan, he would have looked to the SPD to determine coverage. In that situation, he would likely be taking the position that the SPD was a plan document and could be enforced. Because the SPD clearly precluded “double dipping,” the participant could not recover the expenses.
As mentioned, there has been concern about the extent to which an employer can have a plan document that is also an SPD. This case supports that practice. To bolster its position, an employer could state explicitly that the SPD is also the plan document. Alternatively, an employer could adopt a plan document that incorporates by reference the SPD for a description of the benefits.
Of course, this is a district court opinion that could be overturned by the court of appeals. Employers should watch developments in this area to determine whether now-standard practices with respect to health plan SPDs will need to change.