## Facts

- John McGann was an employee covered by H & H Music Company’s group medical plan, which originally provided up to $1,000,000 in lifetime medical benefits.
- In December 1987, McGann learned he had AIDS, submitted claims under the plan, and informed his employer of his diagnosis.
- In March 1988, McGann met with H & H Music officials and discussed his illness.
- In July 1988, employees were notified that effective August 1, 1988, the medical plan would be changed to impose a $5,000 lifetime maximum on AIDS-related claims; no comparable cap applied to other catastrophic illnesses.
- Around the same time, H & H Music became self-insured under the new plan and General American served as plan administrator.
- In August 1989, McGann sued under ERISA § 510, alleging the amendment discriminatorily reduced AIDS-related benefits to interfere with his plan rights or to retaliate for submitting claims.
- By January 1990, McGann exhausted the $5,000 AIDS-related lifetime maximum.

## Issues

1. Whether amending a welfare benefit medical plan to cap AIDS-related benefits constitutes discrimination under ERISA § 510 “for the purpose of interfering” with a participant’s attainment of plan rights.
2. Whether the amendment constituted retaliation under ERISA § 510 for exercising plan rights by submitting claims.
3. Whether the evidence created a genuine fact issue of the employer’s specific intent to interfere with or retaliate against the participant’s ERISA-protected rights.

## Decision

- The Fifth Circuit affirmed summary judgment for the defendants.
- The court held the AIDS-benefit cap, as a plan amendment affecting future benefits, did not by itself establish an ERISA § 510 violation.
- The court found McGann failed to produce evidence creating a genuine issue that the amendment was adopted with the specific purpose of interfering with his plan rights or retaliating against him for making claims.

## Legal Principles

- ERISA does not require employers to provide particular welfare benefits, and welfare benefit plans generally may be amended or reduced, subject to ERISA’s requirements and limitations.
- ERISA § 510 requires proof of the employer’s specific intent to interfere with the attainment of plan rights or to retaliate for exercising ERISA rights; adverse effect alone is insufficient.
- A plan-wide amendment changing future benefit levels—even if it uniquely burdens a then-known claimant—does not violate § 510 absent evidence the amendment was adopted for a prohibited purpose.
- § 510 is primarily aimed at adverse actions taken against an individual (e.g., discharge or discipline) to prevent benefits, rather than ordinary plan design changes, unless prohibited intent is shown.

## Conclusion

The Fifth Circuit held that reducing AIDS-related coverage through a prospective amendment to an ERISA welfare medical plan did not violate § 510 without evidence that the change was made with specific intent to interfere with McGann’s plan rights or to retaliate for submitting claims.


McGann v. H & H Music Co., 946 F.2d 401 (5th Cir. 1991)