Once a case involving personal injuries has been settled or resolved by the payment of a final judgment, the injured party will receive no more money from the closed matter to cover any later incurred expenses such as those for medical care. This rule applies in both civil and workers’ compensation cases.
The question often arises as to whether health insurance will cover post-resolution incurred expenses. The answer depends on the type of coverage available. Medicare, for example, will not cover expenses for which a person has been compensated in an underlying personal injury or workers’ compensation case unless a pre-determined portion of the compensation is first exhausted. The amount that must be exhausted is set forth in what is known as a Medicare Set Aside Arrangement. In contrast, medical benefits available through the Veterans Administration are not subject to being offset against funds recovered in the underlying accident case. These are the two extremes. Health insurance benefits provided through ERISA plans and the Affordable Care Act fall somewhere in between.
A majority, albeit dwindling, number of Americans receive group health insurance through their employers. (The trend is for employers to reduce employee work hours to avoid having to provide group health insurance.) The rights and duties of insureds and insurers under these plans is governed by a federal law known as ERISA (Employee Retirement Income Security Act), see 29 U.S.C. §§ 1001-1461. Many other individuals are covered by individual insurance policies mandated by the Affordable Care Act (ACA), also known as “Obamacare.” Even though ERISA plans must meet certain ACA requirements, in various other important respects the plans are less consumer friendly than individual ACA policies, which are governed by Florida law for Florida issued policies. Two of the most significant differences involve challenging the denial of claims and carrier subrogation rights.
Insurance policies are contracts, the terms of which control the rights and responsibilities of the parties to same. This includes ERISA plans. Most ERISA plans give the plan administrator discretionary authority to construe the terms of the plan, in which case the administrator’s decision is reviewed for an abuse of discretion. Woo v. Deluxe Corp., 144 F.3d 1157, 1160 (8th Cir. 1998) citing Firestone Tire & Rubber Co. v. Bruch, 489 U.S. 101, 115 (1989). In comparison, ACA policies do not get the same level of deference. The standard of review for these policies under Florida law is de novo, which means that the court interprets the policy for itself.
It is not uncommon for ERISA plans to include language purporting to create subrogation rights for medical expenses incurred post-settlement/-judgment. In other words, the plan seeks to limit responsibility for such expenses until the money received through settlement/judgment for medical expenses is exhausted. This was attempted in Shell v. Amalgamated Cotton Garment, 43 F. 3d 364 (8th Cir. 1994). The plan sought to recover for payments made after the insured agreed to settle his claims against third parties. The United States district court held that the insurance plan’s subrogation right applied only to the amount paid before the settlement was agreed upon. The insurance plan appealed. The United States Court of Appeals, Eighth Circuit, affirmed the judgment of the district court.
The plan contract gave the plan the power to interpret the contract’s provisions. Hence, the Eight Circuit reviewed the plan’s interpretation under the abuse of discretion standard. Under this standard, courts consider
“whether the interpretation contradicts the plan’s clear language, whether the interpretation renders any plan language internally inconsistent or meaningless, whether the interpretation is consistent with earlier interpretations, whether the interpretation is consistent with the plan’s goals, and whether the plan satisfies ERISA requirements.”
Even under this stringent standard, the 8th Circuit sided with the district court, which noted “that the plain language of the insurance contract limits the plan’s recovery to the amount it ‘”has paid,”‘ rather than to any amount it ‘”has paid or will pay.”‘ The upper court also agreed with the lower court’s position that the rights of a party with a subrogation interest in an injured person’s claim are no greater than the rights of the injured person himself, hence, once the injured person settles a claim and thus extinguishes his own right to further pursuit of that claim, the rights of the party with the subrogation interest in the claim are extinguished as well. Both courts agreed that an interpretation allowing the party with a subrogation interest to recover for amounts paid by it after a settlement would not only contradict the plain language of the insurance contract but would also render the term “subrogation” meaningless. Finally, the appeals court mentioned that some of the settlement proceeds may have been allocated to other damage elements, such as lost income past and future, putting them beyond the reach of proceeds earmarked for medical expenses. This last point demonstrates the importance of settlement agreement language.
(Speaking of settlement agreements, correspondence and settlement understandings exchanged between the insurer and the insured containing language that the amount paid to satisfy any lien is full and final payment for all past and future subrogation rights, may well preclude the carrier from denying the payment of post-resolution medical expenses.)
Shell should not be read as being the final word on this issue. Different plan language could result in a different outcome. For example, in addition to the interpretations discussed above, the 8th Circuit noted that, “unlike some other insurance contracts, the contract in this case has no reimbursement language separate from the subrogation provisions. See, e.g., McIntosh v. Pacific Holding Co., 992 F.2d 882, 884 (8th Cir.1993), cert. denied, ___ U.S. ___, 114 S.Ct. 441, 126 L.Ed.2d 375 (1993).
ACA policies may also include subrogation and reimbursement language to keep from paying future medical expenses. See section 768.76, Florida Statutes. For example, we represent a young man who sustained serious injuries while performing post-Hurricane cleanup work for his employer. He is covered under his mother’s Blue Cross and Blue Shield health insurance policy, which mistakenly paid some of the accident-related charges (which we got the workers’ compensation carrier to repay.) The BCBS policy contains an exclusion that the carrier will not pay for treatment of occupational injuries or illness covered under workers’ compensation laws. Even though Florida law makes it somewhat easier than ERISA for insureds to challenge subrogation provisions, BCBS’s provisions may be enforceable. We haven’t had to cross that bridge yet.
There are other elements beyond the scope of this blog that may also affect the main topic as well as other important rights. The uninitiated would be well advised to seek the advice of competent legal counsel rather than venture alone through this land-mined filled landscape.
Contact us at 305-758-4900 or by email to learn your legal rights.
Jeffrey P. Gale, P.A. is a South Florida based law firm committed to the judicial system and to representing and obtaining justice for individuals – the poor, the injured, the forgotten, the voiceless, the defenseless and the damned, and to protecting the rights of such people from corporate and government oppression. We do not represent government, corporations or large business interests.
While prompt resolution of your legal matter is our goal, our approach is fundamentally different. Our clients are “people” and not “cases” or “files.” We take the time to build a relationship with our clients, realizing that only through meaningful interaction can we best serve their needs. In this manner, we have been able to best help those requiring legal representation.