Delayed & Denied: Recalibrating the ERISA Attorney's Fee Factors For Healthcare Claims

Millions of Americans count on employer-sponsored health insurance. Recent lawsuits and investigations show, however, that valid claims are often denied. The governing law, the Employee Retirement Income Security Act of 1974 (ERISA), shields plan administrators from their mistakes; if a claim is denied without a valid reason, a consumer may sue for the benefit that should have been paid, but not consequential or punitive damages. One aspect of ERISA potentially incentivizes plan administrators to process claims correctly the first time: an attorney’s fee provision gives judges discretion to award fees to either side; courts have developed a five-factor test to guide their discretion. But individual healthcare claimants can rarely satisfy two of the test’s five factors, thus eroding their chances of recovering fees and blunting any incentive for administrators to decide claims correctly the first time. The attorney’s fee test arose in the 1970s in common fund and pension malfeasance claims; it is an awkward fit for today’s healthcare claims. The Supreme Court observed in 2010 that the factors bear “no obvious relation” to ERISA or existing fee-shifting jurisprudence, holding that courts need not use them at all. Yet courts still do. This Article proposes that courts recalibrate the attorney’s fee factors for individual healthcare claims. The current factors impose duties and considerations found nowhere in ERISA, and many prevailing ERISA plaintiffs cannot recover their attorney’s fees under this standard. A revised five-factor test would help ensure that the fee provision functions as intended and serves ERISA’s dual goals of protecting benefits and providing ready access to the federal courts.