Comments on: :: ERISA Health Plan Subrogation Practice – WSJ Article Sparks Debate

By: Kay

Kay — Sun, 30 Mar 2008 02:31:03 +0000

Subrogration. I was injured in a MVA and disabled. I did win a lawsuit against the car insurance company, but all of it went to Washington State Worker’s Compensation and my insurance company.

That is the law and if it applies to one person, it should be applied to everyone.

By: Professor Roger Baron

Professor Roger Baron — Fri, 30 Nov 2007 16:12:18 +0000

Thanks for the plug, Michael! (I haven’t corresponded with my Florida attorney friend Michael Tobin for quite a while.) Michael’s elephant reference is to the law review article which I published in Mercer Law Review — “Public Policy Considerations Warranting Denial of Reimbusement ot ERISA Plans: It’s Time to Recognize the Elephant in the Courtroom,” 55 Mercer Law Review 595 (2004). This article was written and published in the post-Knudson era, prior to Sereboff. I continue to be amazed at how so many ERISA judicial decisions are made in a vacuum void of discussion of public policy considerations. It seems that the court rulings are “all or nothing” — either the plan gets 100% of what it seeks or it gets nothing. Perhaps someday a moderate rule of reason may start prevailing. [By the way, if I had it to do over again, I wouldn't make the title to that law review article so long!]

By: Michael M. Tobin

Michael M. Tobin — Thu, 29 Nov 2007 21:49:41 +0000

Professor Baron’s Elephant:
Subrogation never should have crept into the courtroom as an assignment of a personal injury claim. Every liability settlement is a discount from full value. Even after verdict to prevent appeal. Insurance companies have sold this foolish notion that all claimants are overpaid. (with the exception of their CEO’s). Subro recoveries are pocketed by insurance companies and never get calculated into the premium charges. Ask any insurance actuary about their “secret profit” cushion set aside every year for IBNR-incurred but not reported. Subro is treated as a windfall in ratemaking.

By: Adam V. Russo, Esq.

Adam V. Russo, Esq. — Mon, 26 Nov 2007 15:15:09 +0000

I said that subro helps…clearly the 2-3% help in limiting costs for the self insured industry. I agree that the actuarial factors do not use subro efforts enough in evaluating premium costs but a part of that is based on the less than standard recovery numbers that most of the Blues and other fully insured products have had over the years.

By: Roy F Harmon III

Roy F Harmon III — Sun, 25 Nov 2007 22:48:22 +0000

Denny has a good point. The ability to actuarially factor in subrogation or reimbursement recoveries when assessing health plan “premium” cost is far from clear.

By: Don Levit

Don Levit — Fri, 23 Nov 2007 18:03:58 +0000

Adam:
You wrote about subrogation helping to ensure the future of the self-insured industry.
Are you saying that without subrogation, that the premiums insurers would have to charge would not be economically feasible for plans to assume?
I understand that subrogation claims account for 2-3% of all claims paid.
If true, wouldn’t the premiums increase only 2-3% if subrogation was not an option?
Don Levit

By: Denny Siebold

Denny Siebold — Wed, 21 Nov 2007 22:18:07 +0000

Roy,

The real problem with these provisions rests with their hidden limitations on benefits. You never find an SPD that says: In the event of an injury, the plan will only provide benefits to the extent that you do not receive compensation for that injury from another source.If a plan is rated properly, subrogation recoveries amount to windfall income.

By: Roy F Harmon III

Roy F Harmon III — Wed, 21 Nov 2007 12:31:52 +0000

To complete one's comprehension of the extent to which Wal Mart is a statistical outlier, one needs to read Administrative Committee of Wal-Mart Stores, Inc. v. Mooradian, 2006 WL 2793183 (M.D.Fla.) (2006). There, having been precluded from pursuing a participantâ€™s estate for reimbursement, Wal-Mart carried its battle for reimbursement of plan expenditures against the participantâ€™s widow. The situation becomes all the more ridiculous when viewed in the context of the vast wealth of the low cost retail leader. See, :: Court Denies Wal-Mart Administrative Committeeâ€™s Motions In Subrogation Controversy On the other hand, don't overlook that the health plans often have to pick up the tab when the liability carriers for the at fault parties refuse to honor their obligations. Take a look , for example, at Brian King's article about Allstate's business practices. The health plan industry subsidizes the likes of Allstate when these carriers apply their own version of the Wal Mart approach to claims settlement.

By: Professor Roger Baron

Professor Roger Baron — Wed, 21 Nov 2007 03:29:55 +0000

Thanks for blogging this, Roy. The misfortune for the Shanks was exacerbated by the death of their son in Iraq which occurred shortly after the trial court’s decision in this litigation. You are right, Roy, that many cases are settled without litigation. Too bad this one wasn’t.

By: Adam V. Russo, Esq.

Adam V. Russo, Esq. — Wed, 21 Nov 2007 00:42:08 +0000

This case makes the cover of the Journal. Did it really have to come to this? While I can understand the reasoning behind the Planâ€™s decision to litigate, often times I wonder whether people realize what this type of case can do to our industry. Could the Plan have agreed to a portion of the settlement funds? It clearly had the opportunity to do so

The point I am trying to convey is that not every decision relating to subrogation rights should go to court or be strictly based on monetary reasons. Plans have to assess the effects that these types of cases can have on the industry as a whole. There is no question that the publicity surrounding this case will only harm the positive results that subrogation can bring to the self-insured industry. The patientâ€™s attorney is attempting to appeal this decision. What effect will this publicity have on that?

In situations where there is not enough money to go around, it is important to think about the ramifications of certain processes to ensure that the overall goals are met by the administrator â€“ to protect the plan, offer reasonable pricing and to ensure the future of the self-insured industry. These stories only boost the arguments for those who want to have universal healthcare and further damage the limited protections that we currently have under ERISA.