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Dos & Don’ts
Subrogation and Reimbursement Claim
- DO Cooperate with the health plan or health insurer or long term disability plan.
- DO Determine the extent of liability coverage as early as possible.
- DO Request a copy of your entire long term disability plan.
- DO Request a copy of your entire health care plan.
- DO Get copies of all payments made to health care providers.
- DO Understand that specific plan language determines your reimbursement obligation.
- DON’T Put up with unlawful FDCPA by collectors.
- DON’T Ever rely on the Summary Plan Description only.
- DON’T Trust letters from the recovery company or companies without the supporting documents.
- DON’T Pay the recovery company just because they say, “It’s an ERISA plan”.
- DON’T Pay the recovery company without validating payments to health care providers.
For more information on subrogation and reimbursement claims, please check out our factsheets below:
Most health plans provide for a right of reimbursement, requiring a participant to reimburse amounts the plan paid, typically for injury-related medical expenses, out of the participant’s recovery from a third party. So do many long term disability plans.
What Happens With the Uninsured?
Your innocent client has suffered a catastrophic injury. Unfortunately, the wrongdoer is not adequately insured. Your client’s ERISA governed healthcare plan has paid medical bills that exceed the insurance coverage. Probably you heard about a Supreme Court case called Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708, 151 L. Ed. 2d 635 (2002), a case that, for a while, changed the landscape of the ability of an ERISA plan to seek and pursue claims for the recovery of money properly paid in the first instance from an ERISA beneficiary. Under that decision individuals were well-protected. That changed in 2006 when the Supreme Court effectively reversed Great-West without saying so in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U.S. 356, 126 S. Ct. 1869 (2006). In 2013, the Supreme Court swung the pendulum even more in favor of insurance companies in McCutchen v. USAirways 133 S. Ct. 1537, 185 L. Ed. 2d 654 (2013)
Impact of the McCutchen Case
Like the famous Administrative Committee of the Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Shank the facts are tragic. James McCutchen worked for U.S. Airways. In exchange for his labors, he received his health benefits under the self-funded U.S. Airways self-insured group health plan. He suffered catastrophic injuries in a car crash. So did a number of other persons. The available insurance was inadequate to compensate all of the injured people.
The health plan paid $66,866 in medical expenses on Mr. McCutchen’s behalf. Given the inadequate coverage by the at-fault driver, and the injuries suffered by others, Mr. McCutchen agreed to accept $10,000 from the driver, and secured another $100,000 from his own under insured motorist coverage. After paying costs and attorneys’ fees, Mr. McCutchen received a net payment of $66,000. (At some point in the ensuing litigation, Mr. McCutchen’s attorneys waived all attorneys’ fees).
The health plan sought reimbursement from Mr. McCutchen for $66,866. You read it correctly. The health plan sought more than Mr. McCutchen received by $866. The District Court ordered Mr. McCutchen to pay the health plan $66,866. The Third Circuit reversed and entered judgment in favor of Mr. McCutchen on grounds that the payment was inequitable given the particular circumstances of the case. The Supreme Court reversed the Third Circuit and remanded the case to the District Court.
What Did the Supreme Court Conclude?
The Supreme Court held that equitable principles—notably the unjust enrichment doctrine—cannot override the terms of a benefit plan. Thus, where a health plan or long-term-disability plan seeks to enforce an “equitable lien by agreement,” a plan beneficiary cannot defend against application of the plan’s lien requirement based on traditional equitable defenses.
Also, the Supreme Court held that where a plan document is silent on a question-in this case, the allocation of attorneys’ fees that Mr. McCutchen expended in obtaining a recovery against the driver and under his underinsured motorist coverage-equitable principles, such as the common-fund doctrine may act as gap fillers due to the health plan’s absence of language regarding the common-fund doctrine. Only if the plan is drafted expressly addressing the question may it resolve it at odds with equitable principles.
The bottom-line is that the Supreme Court held in ERISA governed plans, contract interpretation may override hundreds of years of equitable jurisprudence. The take-away for attorneys representing injured persons is therefore—read the health plan reimbursement provision and long-term-disability plan reimbursement language at the outset of client representation. If you don’t you may find yourself working as a collection agent for an insurance company.
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Learn everything you need to know with this helpful Subrogation and Reimbursement Claim fact sheet.