Hell Yes!!! We've got a settlement for our client, but the bad news is there's still work to be done. Our job as injury lawyers is to not only maximize that settlement or verdict number but also minimize what the client has to pay back out of the settlement to lien holders and medical providers. I know too many lawyers that quit here and never resolve the liens and debts to medical providers. I feel as though leaving liens or medical debts unresolved is a huge disservice to a client and certainly does not protect their best interest. Unresolved debts can damage a client's credit, leave them with a mountain of debt, and potentially get the lawyer in a lot of financial trouble as well. I have heard from various clients of large volume firms that even though they thought they brought home a good number on their case, in the months and even years that followed, they would receive collection notices, harassing calls from collectors, and even lawsuits to collect something the lawyer could have resolved when the client had a lot more leverage to drive costs down.
The primary focus of this article is on ERISA health insurance plans and the obligations of paying the health insurer back for their benefits paid. I will briefly touch on paying back independent providers like hospitals, physicians/surgeons, and orthopedic clinics. This is part of a practical guide meant to serve as an introduction to the rules and hurdles of resolving injury claims.
This post is really about how an attorney can create the largest margins possible for their client and increase their bottom line measurably. I mention this many times in my book: maximizing a settlement or verdict amount is only half the battle; minimizing the amount needed to pay back to health providers and lien holders is almost as important.
Paying Back a Health Insurance Lien
“Wait! I paid for that insurance! Why do I even have to pay this back!?!?”
The cost of health insurance gets more and more out of hand every single year. The plan premiums are astronomical, and many Americans pay a decent-sized chunk of their paycheck towards health care benefits. So, if the injured person has been paying this health insurance premium for years and finally receives benefits under that plan, why should they be legally forced to reimburse the health insurance company for their monies paid in the event of a 3rd party personal injury or wrongful death claim? I have had hundreds of clients ask me this question, and the short answer that provides little satisfaction: its federal law and the health insurance company can make everyone's life hell under the right circumstances. Sometimes these health insurers have a legal right to recovery, but sometimes they don't. Knowing how to tell if a plan has a right of reimbursement could be the difference of hundreds of thousands of dollars in a client's pocket.
Most health insurance companies attempt to make subrogation claims under ERISA. Under the Gerald Ford administration, the United States Congress passed The Employee Retirement Income Security Act of 1974 (ERISA) - a federal law that sets minimum standards for most voluntarily established retirement and health plans in private industry and provides some protections for these company's rights of reimbursement where there is a 3rd party payor of compensation to a beneficiary.
Contrast with The Made Whole Doctrine: State v. Federal
The “Made Whole” doctrine is recognized in most states and under federal common law as well, but at least in Georgia the state law provides better protections. In Georgia, the made whole rule is codified under O.C.G.A. § 33-24-56.1 and states that an insurer can ONLY recover money for benefits paid under their plan if “the amount of the recovery exceeds the sum of all economic and noneconomic losses incurred as a result of the injury…” In other words, unless the injured person has been made whole through financial compensation, they have no obligation to reimburse the health care plan. I don't think I have ever had a client made whole through money alone. Every client I've ever had wouldn't dare go through the injury process again for any compensation. The statute applies to all health insurers, employee benefits plans, disability providers, and even lost wage plans.1 The best protection of this statute for injured persons is that health insurer plan language cannot conflict with the statute or it is unenforceable.2 Georgia is a very friendly made whole jurisdiction, so it forces the inquiry of how that may conflict with the federal rule.
Federal common law is what gives these companies all the power to go after someone for a lien collection. Although federal courts recognize the made whole doctrine, they allow for these health care companies to reject made whole with clear and unambiguous language in their contract with the insured.3 Since federal law trumps state law, these ERISA self-funded plans must be paid back in most circumstances subject to a few exceptions.
Which ERISA Plans Must Be Paid Back?
Self-Funded: As implied above, under ERISA, only companies that self-fund their health insurance benefits program will be entitled to reimbursement. Typically, these are mid-sized or large corporations that can afford to do this. Companies like Delta Airlines, Coca-Cola, and National Cash Register would all most likely self-fund their benefits program. Self-funded means they use their own money to pay health insurance claims but use an outfit like Blue Cross Blue Shield (BCBS) to administer the plan. Bigger the company, the more likely the plan is self-funded, and they have a right to reimbursement.
Fully Insured: Conversely, there are plans that are funded through the company or employer by paying insurance to fund health insurance claims. These plans are subject to made whole and have no right to reimbursement. These include small company health plans, Obamacare or Affordable Care Act plans, or anything bought on the health care exchanges.
ERISA Exceptions: ERISA specifically excludes government employees, employees of religious institutions, and plans of sole proprietors or partnerships with no employees.4 I once represented a man with over $500,000 in medical expenses that BCBS actually paid and asserted their right to reimbursement. A cursory look at the health insurance card revealed the plan was through the county government where the client's wife was employed. My firm responded to the demand for repayment with a flat-out rejection asserting the made whole doctrine. Just to make them go away, we offered to settle the claim for $1,000 to close it out and have peace of mind for the client and me. They acquiesced and accepted the $1,000 as full consideration to close the claim. We saved my client over $499,000! Know the law and don't be afraid to throw it in their face. So just to recap: For a plan to justify reimbursement, it must be a non-governmental self-funded ERISA health care plan that clearly and unambiguously rejects any made whole doctrine and asserts its right to reimbursement.
How Can I Tell For Sure Whether it's Self-Funded
The only way to know for sure whether a plan is reimbursable is to read the plan language and make sure it specifically rejects made whole and asserts its right to reimbursement. Doing this is harder than it sounds. An attorney has to contact the health insurance company asserting its right to recovery and get his hands on a lot of paperwork. There's a trick or two I've learned to speed this process up. First, I like to start the process off early, well before settlement. If ERISA inquiry isn't done until after the case is settled, then that can be very frustrating for everyone involved. The client wants their money, and the attorney wants to close out the case. My team makes contact with a health insurer as soon as we learn they have paid benefits.
Second, I like to write them a long, detailed letter telling them they are NOT a self-funded plan (even though I have no basis for this assertion), they have NO right to recovery, and we are disregarding their claim pursuant to the made whole doctrine. I then go on to say if they are a self-funded plan, please provide certain plan documents within 30 days or we will distribute funds to the client. This seems to light a fire and usually gets us an email or a fax as soon as they receive it with some proof of a qualifying self-funded plan. If the documents provided establish they are self-funded, and the contract language specifically rejects made whole, then I will move onto negotiating the lien.
The most important documents that they need to provide are the actual health insurance contract, the Summary Plan Description (SPD), and the Form 5500. In order to claim its rights to reimbursement, the contract should protect the plan's right to recovery, AND reject the made whole doctrine.
The SPD should contain language on how the plan is paid. If it suggests the plan is paid by the company's assets or a trust, then it is self-funded. If the SPD suggest any other source like an insurer, then it could be a fully insured plan and not subject to recovery.
The Form 5500 is another way to determine whether it is self-funded v. fully insured. This form can be found on FreeERISA.com. The critical boxes are 1A, and 9A. 1A says whether it is a single employer plan or a multiple-employer plan. Single employer plans most likely mean it is self-funded, whereas multi-employer means they are exempt from ERISA regulation. 9A lists how the plan is funded. If it says “general assets,” or “trust,” then it is likely self-funded. If it checks “insurance” then it's not likely a self-funded plan.
Recap: First, look at the Form 5500 and the SPD for indications on how the plan is paid and whether it is single employer respectively. If ERISA self-funded is confirmed, then proceed to look over the plan contract and see whether the plan protects its right to recovery AND rejects the made whole doctrine. If it's not self-funded OR the plan doesn't reject made whole and assert its right to recovery, then the attorney should argue “Made Whole” applies and stand their ground. In this situation, I will offer some nominal amount in order to close out the claim.
Negotiating the Health Insurance Lien
Let's say it's been confirmed the plan is self-funded and the contract is air-tight. What next? This is where I have to get creative. If early on before the case actually settles, then you come up with a reduction request amount that will help get the case settled and make sure the collecting party knows what your number has to be. If the case is settled, then I then paint a bleak picture of the client and highlighting all of their long-term health issues they face because of the injuries. On any given case I typically see lien reductions of at least 10% and as high as 33-50%. I've noticed an inverse trend where it appears that the bigger number received by the client means the less the collection company is willing to reduce their lien.
At Paisley Law, LLC, we embrace the health insurance lien resolution process. In so many cases we win, we are capped at the insurance policy limits. This can be an amazing hack at reducing costs and maximizing what the personal injury client receives. Attorney Jim Paisley takes on this responsibility in all of his metro Atlanta, and Georgia wide personal injury cases. Call Jim Paisley now at 404-618-0960 or email him [email protected].