Health Plans More Aggressive in Seeking Legal Recoveries, Thanks to High Court

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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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