US AIRWAYS, INC. v. McCUTCHEN

[nycbusdriver]

Pilot goes out for medical reasons. Looks like something that is going to be permanent. Starts collecting LTD from the company once his sick leave runs out. After several months, the company contacts him to let him know that he is eligible for Social Security benefits due to what ails him. So, he call SS and he is indeed due some benefits. Grateful for the "heads up" that the company gave him, he applies and receives a sizable back payment from SS, then monthly payments start from the government.

Soon, the company sends him a bill to have most of this LTD monies to that point returned to the company, and his LTD going forward will now be reduced by the amount that SS i paying him monthly. Seems like SS benefits (or any other insurance benefits, e.g. PBGC) allow the company to reduce their LTD payout by an equal amount.

Luckily, he had a good attorney and ended up not repaying what he had already gotten on LTD, but he was saddled with the offset.

So, the company's generous "heads up" was merely a smokescreen to reduce their own liability. What SLEAZE.

 

[CallawayGolf]

The point is you can go on and on ad nausea about fiduciary responsibility. We paid such a nominal percentage of our premium it's not worth mentioning. As a Employee and Spouse we paid less then $600 annually out of pocket in premiums and once we reached a threshold of $3000 everything was paid 100%. It was absolutely terrific insurance and Prudential was very easy to work with. The reason being if you had to get HR involved the company would rip Prudential a new one.

The "Other people's money" argument is a crock of shite just like Kirby. Company pays me a salary, out of the salary the thugs from the IRS confiscate their piece of the action and the company holds back a percentage as an insurance premium. So it's the companies money to do with it as they see fit. In the case I mentioned they decided it was good business to treat their employees a certain way. A way that US Airways is unfamiliar with. Here we are some 17 years later and I'm saying good things about the company. The company is a household word and has a sterling reputation as a great place to work which is yet another stark contrast. The Company had an approach to employees that was essentially "We're going to work your assets off and reward you accordingly". US Airways message to their employees as a result of this and numerous other actions is "We're going to work your assets off, Screw you every chance we get then wring our hands in mock surprise when the customer satisfaction numbers come out"

You're a nice person Golf, I enjoy reading your posts and I get what you're trying to say, however you have to face facts, you work for a company run by amoral scumbags. This court case is but a symptom of the disease that infects many companies and I want to point out that US Airways is neither unique nor one of the worst. In this country there is a right way, a wrong way and the legal and illegal way to treat an employee. Sadly what's right is usually not in alignment with what's legal.

I'm all for being generous personally, but the company has to follow the law and protect the rights and interests of all members of the group which in this case means being reimbursed for the accident from the funds of the person or insurance company who actually caused the accident. The real low life in this case is the attorney for mr. McCutchen who got him $10,000 for nearly $70,000 in medical bills alone and then milked a state fund for underinsured drivers for another $100,000 so he (the lawyer) could pocket $50-60k in fees. If McCutchen had the interests of his fellow employees in mind he might not have settled for such a paltry settlement or not used such an expensive personal injury slime ball lawyer. There's your unjust enrichment right there. The US executives had nothing to do with this other than to do their best to ensure the employee-funded medical insurance money was managed according to the law and the objective policies designed to keep premiums reasonable for all. The appeals court got it wrong, which is fairly common these days.

 

[BoeingBoy]

It seems simple to me. Did McCutchen need medical treatment? Did the company offer medical coverage to pay for medical treatment which McCutchen enrolled in? Was the company coverage contingent upon lack of recovery for medical treatment from presumably the parties responsible for McCutchen's injuries? Unless all 3 answers are yes, and especially the third, the company was wrong.

Jim

 

[CallawayGolf]

It seems simple to me. Did McCutchen need medical treatment? Did the company offer medical coverage to pay for medical treatment which McCutchen enrolled in? Was the company coverage contingent upon lack of recovery for medical treatment from presumably the parties responsible for McCutchen's injuries? Unless all 3 answers are yes, and especially the third, the company was wrong.

Jim

McCutchen did need medical care and he was insured under the company plan. He was also required to reimburse the plan with any monies he received from a third party to pay for the same. He received $110,000 to cover those same medical costs but paid an overpriced law firm roughly $60k in fees leaving him short of properly reimbursing his fellow employees for taking a settlement that didn't fully cover his medical costs and attorney fees. His high-priced lawyer should have reviewed his client's legal obligation to the company plan and ensured that the final settlement wouldn't leave his client short of the funds needed. The district court seems to have figured this out but the appeals court decided his fellow employees didn't mind making his attorney a bit richer a their expense.

 

[BoeingBoy]

He received $110,000 to cover those same medical costs

That's something new you've thrown in. Can you cite where it is published that the entire $110K was for medical expenses? Surely anyone would assume that part of the recovery would go to legal fees, whether based on billable hours or a percentage of the recovery. How about medical bills not covered - meeting deductibles, co-pays, etc. US didn't pay out for those but McCutchen did. How about the loss/repair of McCutchen's vehicle - wouldn't one assume that that would be included in the recovery? What about the always claimed "pain and suffering" - how much of the $110K was for that? In short, it appears that US wanted to be made whole and didn't really care if that left McCutchen with more expenses than were paid for.

Now let's look at the "other people's money" aspect. US sets "premiums" annually, presumably after anticipating what the medical bill will be for the coming year. If that total medical coverage bill is less than forecast, does US refund any of the "premiums" to the employees? I think we all know the answer - no, the savings (including excess "premiums" go to the bottom line of the P&L statement. So if US experiences lower medical expenditures than the "premium" is based on, who's taking "other people's money"?

Of course, the opposite is true if US medical costs exceed the amount estimated. US doesn't re-adjust the "premiums" daily - the extra spending on medical costs flows to the bottom line. in this case everyone who uses their medical coverage is using "other people's money" to improperly lower the "premiums".

In the real world, that's what insurance is all about and self-insured companies are effectively offering insurance. Everyone pays into the system based on the anticipated risk of the group. Individuals who end up not needing the coverage pay their share so that those who need it more can be insured for less cost. So anyone making a claim is using "other people's money" to lower their own cost. What makes it fair, at least to a large degree, is that no one knows whether they'll be the one needing to make a claim the next week, month, year. That's true for the company offering the coverage too - US doesn't know with precision what the cost of employee medical care will be next year but yet it sets "premiums" for next year. While US may underestimate the cost of employee health care now and then, I'd be extremely surprised if the average year was underestimated. After all, the higher the estimate the higher the "premium" each enrolled employee pays and US is more than happy to get more in "premiums" than less.

Jim

 

[Barrister]

I'm all for being generous personally, but the company has to follow the law and protect the rights and interests of all members of the group which in this case means being reimbursed for the accident from the funds of the person or insurance company who actually caused the accident. The real low life in this case is the attorney for mr. McCutchen who got him $10,000 for nearly $70,000 in medical bills alone and then milked a state fund for underinsured drivers for another $100,000 so he (the lawyer) could pocket $50-60k in fees. If McCutchen had the interests of his fellow employees in mind he might not have settled for such a paltry settlement or not used such an expensive personal injury slime ball lawyer. There's your unjust enrichment right there. The US executives had nothing to do with this other than to do their best to ensure the employee-funded medical insurance money was managed according to the law and the objective policies designed to keep premiums reasonable for all. The appeals court got it wrong, which is fairly common these days.

NICDOA
NPJB

 

[CallawayGolf]

That's something new you've thrown in. Can you cite where it is published that the entire $110K was for medical expenses? Surely anyone would assume that part of the recovery would go to legal fees, whether based on billable hours or a percentage of the recovery. How about medical bills not covered - meeting deductibles, co-pays, etc. US didn't pay out for those but McCutchen did. How about the loss/repair of McCutchen's vehicle - wouldn't one assume that that would be included in the recovery? What about the always claimed "pain and suffering" - how much of the $110K was for that? In short, it appears that US wanted to be made whole and didn't really care if that left McCutchen with more expenses than were paid for.

Now let's look at the "other people's money" aspect. US sets "premiums" annually, presumably after anticipating what the medical bill will be for the coming year. If that total medical coverage bill is less than forecast, does US refund any of the "premiums" to the employees? I think we all know the answer - no, the savings (including excess "premiums" go to the bottom line of the P&L statement. So if US experiences lower medical expenditures than the "premium" is based on, who's taking "other people's money"?

Of course, the opposite is true if US medical costs exceed the amount estimated. US doesn't re-adjust the "premiums" daily - the extra spending on medical costs flows to the bottom line. in this case everyone who uses their medical coverage is using "other people's money" to improperly lower the "premiums".

In the real world, that's what insurance is all about and self-insured companies are effectively offering insurance. Everyone pays into the system based on the anticipated risk of the group. Individuals who end up not needing the coverage pay their share so that those who need it more can be insured for less cost. So anyone making a claim is using "other people's money" to lower their own cost. What makes it fair, at least to a large degree, is that no one knows whether they'll be the one needing to make a claim the next week, month, year. That's true for the company offering the coverage too - US doesn't know with precision what the cost of employee medical care will be next year but yet it sets "premiums" for next year. While US may underestimate the cost of employee health care now and then, I'd be extremely surprised if the average year was underestimated. After all, the higher the estimate the higher the "premium" each enrolled employee pays and US is more than happy to get more in "premiums" than less.

Jim

The company has a very strict fiduciary responsibility not to the corporate officers or to the shareholders but to the employees or participants in the plan. This lawsuit wasn't filed to feed some perceived sense of greed on the part of Management but to protect the financial interests of employees and participants. If you have proof otherwise, please contact the DOL that has regulatory oversight over the EIRSA plans.

Q: What are the basic fiduciary standards for defined contribution and other retirement plans?
A: The cornerstone of ERISA’s fiduciary standards is found in Section 404, which explicitly sets forth ERISA’s requirements for prudence in asset management. Specifically, Section 404(a)(1) directs a fiduciary to “discharge his duties with respect to the plan solely in the interest of the participants and beneficiaries and for the exclusive purpose of providing benefits to participants and their beneficiaries, and defraying reasonable expenses of administering the plan.”
ERISA further requires that a fiduciary act “with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of like character and with like aims.”
The “prudent man” standard has been interpreted and applied as a “prudent expert” standard. It is more stringent than standards contained in most other corporate and securities laws, which generally require only that there be no negligence or gross negligence.

 

[Barrister]

uote name='CallawayGolf' timestamp='1321562304' post='845951']
I didn't mention this case specifically because I haven't read through all of the filings and rulings. I was simply stating the fact that insurance providers who fail to control costs and eliminate fraud, waste and abuse will either collapse under the financial burden (mismanagement) or they will have to raise premiums and/or exclude previously covered procedures/services in order to survive. It's just the mathematical/financial reality of a world where goods and services are not free.

Courts make poor/wrong rulings all the time. Legally they have the authority to enforce their decision on the effected parties, but that certainly doesn't make their rulings right, especially if my opinion is the one that counts for the final evaluation (and you did ask me for mine). The federal government, which includes the courts, inserts itself into the private sector well-beyond what the Constitution allows for. In this case the Company believed it was owed money from an employee and it should have every right to seek to get it back. Instead of going to court, they should have just docket the employee's pay. If the employee didn't agree and could not come to an agreement with the company, he/she could simply quit and go somewhere else leaving the company holding the bag for the unpaid balance. No court or federal involvement needed between an employee and employer relationship. Simple, easy and completely effective.
[/quote]

Your stupidity is frightening!!


NICDOA
NPJB

 

[CallawayGolf]

Your stupidity is frightening!!


NICDOA
NPJB

And yet you fail to refute a single statement I have made and you are the one who can't seem to use the quote feature properly.

 

[BoeingBoy]

Your Q&A refers to retirement plans and the fiduciary responsibility of those that handle the funds on behalf of those in the plan - it doesn't reference health insurance plans which are a different animal. For self-insured health insurance plans, the company is handling mostly the company's money and in that it has a responsibility to shareholders to maximize profits/minimize losses.

Jim

 

[CallawayGolf]

Your Q&A refers to retirement plans and the fiduciary responsibility of those that handle the funds on behalf of those in the plan - it doesn't reference health insurance plans which are a different animal. For self-insured health insurance plans, the company is handling mostly the company's money and in that it has a responsibility to shareholders to maximize profits/minimize losses.

Jim

Perhaps this is more to your liking from the DOL website:

What Is The Significance Of Being A Fiduciary?
Fiduciaries have important responsibilities and are subject to standards of conduct because they act on behalf of participants in a group health plan and their beneficiaries. These responsibilities include:
Acting solely in the interest of plan participants and their beneficiaries and with the exclusive purpose of providing benefits to them;
Carrying out their duties prudently;
Following the plan documents (unless inconsistent with ERISA);
Holding plan assets (if the plan has any) in trust; and
Paying only reasonable plan expenses.

Seems pretty similar to me (big surprise since it's from the same DOL regulation). The underlines were added by me. Note also that plan assets (over payments) are held in trust not added too the bottom line net income. Losses of course are covered by the company P&L, but the company cannot earn a profit by running the plan in the same way an independent insurer can.

 

[crazystnic]

Too bad the company and PBGC were not so eagle eyed when it came to the pilot pension.

 

[SparrowHawk]

Pilot goes out for medical reasons. Looks like something that is going to be permanent. Starts collecting LTD from the company once his sick leave runs out. After several months, the company contacts him to let him know that he is eligible for Social Security benefits due to what ails him. So, he call SS and he is indeed due some benefits. Grateful for the "heads up" that the company gave him, he applies and receives a sizable back payment from SS, then monthly payments start from the government.

Soon, the company sends him a bill to have most of this LTD monies to that point returned to the company, and his LTD going forward will now be reduced by the amount that SS i paying him monthly. Seems like SS benefits (or any other insurance benefits, e.g. PBGC) allow the company to reduce their LTD payout by an equal amount.

Luckily, he had a good attorney and ended up not repaying what he had already gotten on LTD, but he was saddled with the offset.

So, the company's generous "heads up" was merely a smokescreen to reduce their own liability. What SLEAZE.

In defense of US, the example you give is pretty common and perfectly legal. Now the company I worked for was right on top of things and they told you day 1 of LTD that you were required to apply for SS benefits and they would help you with the paperwork. If the employee got a lump sum of retroactive benefits the company never chased you for it. However if you failed to apply in a timely fashion they would cut off your LTD until you filed. I know of one case where they helped the employee file the appeal to the denial. Funny thing is that they never had to ask anyone to please file (at least not in my operating unit). It was understood by all that this was a requirement because they had an actual HR department instead of the Thug like Labor Relations Department at US Airways.

The simple difference, Fiduciary BS aside is that it's a tale of two companies. One is highly regarded by its customers & employees, pretty much profitable its entire history except for a few rough years early 1980's and again in the '90's. A company that viewed their employees as assets versus one that views its employees as liabilities and manages them with all the finesse of a 1920's coal mine operator in WV and hasn't strung three profitable year together in 20 years, been BK 3 times and has a reputation as one of the worst managed companies in the USA.

 

[luvthe9]

LCC loses big time!!!!

 

[SparrowHawk]

LCC loses big time!!!!

They did get spanked in court. I, for one resent the notion presented here by some that it was his "High Priced Lawyer" who got him something he didn't deserve. If you read the decision and some of the underlying case laws, US Airways was trying to gain what the court called a "Windfall" and under most legal doctrine that's wrong.

As I said earlier, the fact that US went after him is yet another clue piled upon the mountain of evidence which accurately displays US Airways Senior Management's attitude towards employees.