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Is a conflict created when the same insurance company both administers and funds a benefit plan? That’s the question that the U.S. Supreme Court will decide later this year – and it could have a significant impact on the insurance industry.

The case

The case in front of the U.S. Supreme Court is MetLife vs. Glenn. Wanda Glenn worked for Sears, Roebuck & Company for 14 years. During that time, she developed cardiomyopathy, a serious disease that weakens the heart muscle. Her doctor told her that she should stop working. She did just that and filed a disability with her employer’s insurance carrier, MetLife – who both administered and funded the insurance plan.

Her insurance benefits made Glenn eligible to receive two years of disability benefit payments if she could prove that she, in fact, could no longer perform the central functions of her job at Sears. She was able to prove that and MetLife paid her disability benefits for two years – less monies that she received through the government under Social Security Disability (SSD).

After receiving two years of payments from MetLife, the insurer then required Glenn to prove that she could not hold down any job for which she was qualified. Again, her doctor submitted reports saying that Glenn could not work at all without her heart condition becoming worse. However, this time, MetLife called in its own doctors to review Glenn’s file. MetLife’s doctors never physically examined Glenn – they only reviewed her files and ultimately denied her claim and terminated her benefits. She sued MetLife claiming that her benefits were wrongfully terminated.

A conflict of interest?

Although the case began as a simple question of wrongfully terminated benefits, it turned into something far greater. The courts reviewing her case looked at the question of whether MetLife was operating under a conflict of interest because it both funded and administered the plan and whether an insurer should be allowed to do both. While the Employment Retirement Income Security Act (ERISA) allows this, courts are frequently divided on how to review these cases due to a lack of applicable standards. The nation’s highest court will attempt to resolve this issue.

It is estimated that nearly half of all employee health and disability plans in the U.S. are funded and administered by the same company. If the U.S. Supreme Court rules that this is a conflict of interest, it could change the way that millions of Americans are covered and receive health and disability benefits. The Court is expected to deliver a decision on the matter in July 2008.