ERISA
Health Plans More Aggressive in Seeking Legal Recoveries, Thanks to High Court
Posted Nov 20, 2007, 06:55 am CDT
By Debra Cassens Weiss
Some people who are injured and receive a settlement or verdict are getting a big surprise: More litigation from the health plan that paid their benefits and now wants the money back.
Employee health plans are getting more aggressive about enforcing subrogation clauses that permit recovery of the money, buoyed by a U.S. Supreme Court ruling last year, the Wall Street Journal reports (sub. req.).
Insurers recover some $1 billion a year, according to the industry group, American Benefits Council and America's Health Insurance Plans. A “cottage industry” of subrogation lawyers and benefit-recovery firms help companies go after the money.
In Sereboff v. Mid Atlantic Medical Services (PDF), the Supreme Court ruled that a health plan could sue for recovery of settlement money held in a separate, identifiable fund under ERISA provisions allowing suits for “equitable relief.”
The newspaper highlighted the case of Deborah Shank, who suffered brain damage and uses a wheelchair as a result of a traffic accident. She received $417,000 in a settlement after legal fees and expenses, but the entire amount will go to Wal-Mart under its health plan subrogation agreement.
Shank’s lawyer had argued that Wal-Mart was only entitled to a partial payment, since his client was not fully compensated for her damages under the settlement. A federal judge sided with Wal-Mart last year, and the St. Louis-based 8th U.S. Circuit Court of Appeals affirmed.
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Comments
Posted by Legal Eagle - 7 months, 2 weeks, 1 day, 16 hours, 24 minutes ago
What’s even worse about these types of situations is that the contractual provisions of the ERISA health care plan state that the attorneys fees for any subrogation recovery are to be paid by the insured. Which means that the lien holder will not accept a reduction of their lien. In Illinois, they would be forced to apply the common fund doctrine, which means that I as the lawyer for the common fund is entitled to attorneys fees for the recovery of their lien amount. However, I have a letter in my file wfrom a benefits plan which threatens to file suit against the insured if I enforced my attorneys lien from their recovery and they threatened to deny future claim payment until the attorneys liien payments was completely offset. So for all priactical purposes, you no longer have an attorneys lien against the recovery for the plan and you are for all practical purposes reducing the client’s net recovery. This is contrary to many statute statutes which limit medical provider and hospital lien recoverys. These decisions give ERISA health care plans a right to ‘super-recovery’ in a class of its own and puts it on par with the Medicare superlien statutes.
However, if subrogation truly means to step into the shoes of another party, doesn’t that mean the health care plans are also subject to the medical lien statutes?
Posted by Legal Eagle - 7 months, 2 weeks, 1 day, 16 hours, 21 minutes ago
Wow, my post was poorly written. It is very difficult to write and proofread in this tiny little box where I am expected to post.