When something is as unfair as ERISA, and violates some of our most basic ideas about how the judicial process should operate (like a man not being a judge in his own case, for example), you have to wonder whether the Constitution might not have something to say about it. If you ask me, it does.
The Fifth Amendment does more than just allowing people to clam up if they’re about to incriminate themselves. It also “forbids the federal government from depriving persons of ‘life, liberty, or property, without due process of law.” Buckingham v. Sec'y of U.S. Dept. of Agr., 603 F.3d 1073, 1081 (9th Cir. 2010). Now your entitlement to, say disability benefits, from an ERISA-governed insurance policy, very very likely qualifies as a property interest. (I’m gonna cheat and just assume it does, because I want to get to the good stuff, but I am pretty sure I’m right).
And what is one of the most, if not the most, important component of due process? It’s “an impartial and disinterested tribunal in both civil and criminal cases.” Marshall v. Jerrico, Inc., 446 U.S. 238 (1980). As recently as 2009, in Caperton v. A.T. Massey Coal Co., Inc., the Supreme Court observed “It is axiomatic that “[a] fair trial in a fair tribunal is a basic requirement of due process.”
So what process do you get under ERISA? First, you get a decision by an insurance company, essentially a “reconsideration by the insurance company as to whether it should continue to pay benefits, and thus reduce its profits.” That’s not an “impartial and disinterested tribunal.”
Then you go to court and the judge, who is impartial, is legally required to have a thumb on the scale in the insurance company’s favor. So a fair decisionmaker is required, by law, to use an unfair process, where the unfair decision made by the insurance company comes with a wholly undue presumption of correctness. The question is, then: does this presumption of correctness, given that the decision under review was made by a party to the very dispute in question, create a derivative constitutional defect?
That phrase “derivative constitutional defect” is not mine; I stole it from a 1993 Supreme Court case – an ERISA case! – called Concrete Pipe & Products of Cal. v. Construction Laborers Pension Trust for Southern California. It was about “withdrawal liability,” which refers to the funds an employer owes when it withdraws from a multi-employer pension plan, to make sure it has paid enough to account for its employees’ share of future pension benefits. The way it works is that the pension fund tells the withdrawing employer how much it owes, and the employer says take a flying leap, that’s way too high a figure. Under ERISA this type of dispute goes first to a neutral arbitrator, and if the employer disagrees with the arbitrator’s decision, it goes to a court – which has to presume the arbitrator was correct, very much like a court treats an insurer’s denial of benefits with “deference.”
The Supreme Court decided this was OK under the Fifth Amendment, but look how they arrived at that conclusion:
Because the statute as we construe it does not foreclose any factual issue from independent consideration by the arbitrator (the presumption is, again, assumed by all to be inapplicable to issues of law), there is no constitutional infirmity in it. For the same reason, that an employer may avail itself of independent review by the concededly neutral arbitrator, we find no derivative constitutional defect infecting the further presumption that a district court must afford to an arbitrator's findings of fact.
See what they did there? In order for it to be constitutional for a court to treat a litigant’s own decision with deference, somewhere along the line there has to be an “independent review by a concededly neutral arbitrator.” Otherwise, there’s a “derivative constitutional defect.”
An ERISA insurer, of course, is not “concededly neutral.” And its obviously un-neutral decision gets treated with deference by a court. But where is the neutral arbitrator in between? It’s not there.
And so, we see that ERISA’s approach to adjudicating insurance disputes is not only absurd and unfair – it’s unconstitutional.