provides the requisite degree of certainty and predictability so as to shield ERISA-regulated plans from the impact of unanticipated and expressly disavowed claims.
The third court of appeals decision addressing conflicting coordination of benefits clauses in ERISA-regulated plans is that of the United States Court of Appeals for the Ninth Circuit in PM Group Life Ins. Co. v. Western Growers Assurance Trust, 953 F.2d 543 (9th Cir. 1992). There, the court was faced with incompatible "other insurance" provisions in two self-funded ERISA plans. When the daughter of Jose and Maria Campos was born three months premature, the terms of both parents' employee benefit plans rendered each secondarily liable and the other primarily so. The mother's plan provided that, in all cases, the father's plan would be the primary insurer ("the gender rule") The father's plan provided that the plan covering the parent whose birthday fell earlier in the calendar year -- in this case, the mother's -- was the primary plan ("the birthday rule").
Recognizing that ERISA was silent on the issue of conflicting "other insurance" provisions, the court first emphasized the need to fashion a uniform federal coordination of benefits rule. Id. at 547 ("uniformity enables employers 'to predict the legality of proposed actions without the necessity of reference to varying state laws'") (citing Pilot Life, 481 U.S. at 56). To do so, the court looked for guidance to, among other things, the NAIC's Group Coordination of Benefits Model Regulation. Id. The NAIC's Model Regulation, adopted by most though not all states, espoused the birthday rule. Id. Thus, due both to its widespread acceptance as well as its gender neutrality, the court adopted the birthday rule as the federal common law rule for resolving such conflicts among coordination of benefits provisions in ERISA-regulated plans. 953 F.2d at 548.
The foregoing examination of the federal common law relating to conflicting coordination of benefits provisions in ERISA-regulated plans reveals two approaches that could logically be applied to the conflict presented in the case at bar. The first would be for the court to find both plans primarily liable and order a pro-rata apportionment of the claims. The second would be to apply the relevant provision of the NAIC Model Regulation, provided that it is consistent with the policies underlying ERISA.
Over twenty years ago, leaders of the insurance industry realized that "there is only one way to deal with the problem of duplication of coverage, and that is by having everyone follow the same rules with respect to the order of benefit determination. The alternative is chaos." Jack B. Helitzer, Coordination of Benefits: How and Why it Works, 4 Benefits Law J. 411, 413 (1991). Accordingly, beginning in 1971, the NAIC developed and issued its Group Coordination of Benefits Model Regulation. The Model Regulation is a comprehensive coordination of benefits scheme, which, if adopted by all employee benefit plans, would eliminate conflicts among the providers of duplicate coverage in virtually all cases. The section of the Model Regulation addressing employee/dependent conflicts provides that "the benefits of the plan which covers the person as an employee, member or subscriber (that is, other than as a dependent) are determined before those of the plan which covers the person as a dependent...." NAIC Group Coordination of Benefits Model Regulation § 5B(1) (1991). That is, "the plan covering the person as an employee pays benefits first. The plan covering the same person as a dependent pays benefits second." Helitzer at 415.
Reimbursement or "always excess" plans are not recognized under the Model Regulation. Jack B. Helitzer, former chairman of the Industry Advisory Committee to the NAIC Task Force on Coordination of Benefits, has articulated the reason for the NAIC's hostility toward reimbursement plans as follows:
In some isolated instances, uninsured plans write their contracts so that they are excess or always secondary to all other plans. The stated intent is to save money, or "contain costs."