Managed care companies help insurers and government programs coordinate healthcare plans by making coverage determinations for participants. In many situations, case managers conduct utilization reviews to determine the medical necessity of services requested. Obviously, these decisions can have a tremendous impact on the plan’s participants as well as the overall financial health of the insurance program. Last month in an unpublished opinion, the Fifth Circuit Court of Appeals concluded that managed care case managers are non-exempt employees, and are therefore entitled to payment of overtime under the Fair Labor Standards Act.

In Clark v. Centene Co. of Tex., L.P., a group of former case managers classified as administrative exempt sued for overtime, claiming that their job duties failed to meet the requirements for the exemption under DOL regulations. They described their jobs as largely routine, involving comparison of participant medical information to established care guidelines and similar clerical functions. The employer argued that the case managers’ duties closely resembled those of insurance claims adjusters who qualify for the administrative exemption based on the degree of discretion and independent judgment exercised in their duties.

The Fifth Circuit disagreed, affirming the district court’s judgment in favor of the plaintiffs. The court distinguished the case managers from insurance adjustors by noting that initial approvals or denials of requests for treatment outside of established guidelines were sent to a medical manager for review. The case managers lacked the judgment and discretion to make exceptions from the guidelines, and their work more closely resembled ordinary inspection work as defined under the DOL rules.

Managed care companies could conceivably restructure case manager positions to invest them with sufficient discretion to meet the requirements of the administrative exemption. However, as with exempt insurance adjustors, these changes would need to vest employees with close to final authority to make exceptions to standard care guidelines.