:: Health Plan Subrogation Provisions: A Revue
I am not sure why this has not been done before, but it occurred to me that perhaps there would be interest in a catalog of subrogation provisions from notable cases. Below are my selections for a subrogation provision revue.
These clauses are not quoted in their entirety, but taken from case excerpts. Many cases were overlooked because I didn’t find suitable quotes. Of course, these provisions are not recommended as presented necessarily, but the language should provoke thought as to what is better or worse for inclusion in a health plan document. For my conclusions on essential elements of a subrogation provision, see my notes here.
Be that as it may, here are my selections. (Nominations of additional cases are welcome and will be added to the list.)
- Sereboff v. Mid-Atlantic, 126 S.Ct. 1869, 164 L.Ed.2d 612, 74 USLW 4240 (2006):
The plan provides for payment of certain covered medical expenses and contains an “Acts of Third Parties†provision. This provision “applies when [a beneficiary is] sick or injured as a result of the act or omission of another person or party,†and requires a beneficiary who “receives benefits†under the plan for such injuries to “reimburse [Mid Atlantic]†for those benefits from “[a]ll recoveries from a third party (whether by lawsuit, settlement, or otherwise).†App. to Pet. for Cert. 38a. The provision states that “[Mid Atlantic's] share of the recovery will not be reduced because [the beneficiary] has not received the full damages claimed, unless [Mid Atlantic] agrees in writing to a reduction.†Ibid.
- Popowski v. Parrott, 461 F.3d 1367 (11 Cir. 2006):
The subrogation and reimbursement provision in the Mohawk Plan, unlike that of the United Distributors Plan, claims a right to reimbursement “in full, and in first priority, for any medical expenses paid by the Plan relating to the injury or illness,” but does not specify that that reimbursement be made out of any particular fund, as distinct from the beneficiary’s general assets. Instead, it makes receipt of “a settlement, judgment, or other payment relating to the accidental injury or illness” a trigger for the general reimbursement obligation. Id. Further, in requiring reimbursement “in full,” it fails to limit recovery to a specific portion of a particular fund. Accordingly, we conclude that, because the Mohawk plan fails to specify that recovery come from any identifiable fund or to limit that recovery to any portion thereof, it fails to meet the requirements outlined in Sereboff for the assertion of an equitable lien for the purposes of 29 U.S.C. § 1132(a)(3).
- Moore v. CapitalCare, Inc., 461 F.3d 1 (D.C. Cir. 2006):
2. Subrogation ….
a. To the extent that benefits for covered services are provided or paid under this Contract, the Corporation shall be subrogated and succeed to any rights of recovery of a Participant for expenses incurred against any persons or organizations except insurers on policies of health insurance issued to and in the name of the Participant.
b. The Participant shall pay the Corporation all amounts recovered by suit, settlement, or otherwise from any third party or his insurer to the extent of the benefits provided by this Contract.
c. Attorneys’s [sic] fees, court costs, and any other costs expended in the course of securing recovery by suit, settlement, or otherwise, shall be subtracted from the amount to be paid to the Corporation; the amount to be subtracted shall be as follows:
(1) If the case is settled out of court-one-quarter of the amount of benefits paid or to be paid for covered services; or to be paid for covered services or
(2) If the case is settled as a result of litigation–one third of the amount of benefits paid or to be paid for the covered services.
- Administrative Committee of Wal-Mart Stores, Inc. v. Shank, 2006 WL 2546797 (E.D.Mo. Aug 31, 2006):
Plaintiff relies on the “Right to Reduction, Reimbursement and Subrogation” provision contained in the January 2000 Summary Plan Description (SPD). This provision provides in relevant part as follows:
[t]he Plan has the right to 1) reduce or deny benefits otherwise payable by the Plan and 2) recover or subrogate 100 percent of the benefits paid or to be paid by the Plan on your behalf and or your dependents to the extent of any and all of the following payments: Any judgment, settlement or any payment made or to be made, relating to the accident, including but not limited to other insurance. SPD at 19. The SPD further states that “[t]he Plan has first priority with respect to its right to reduction, reimbursement and subrogation.” In addition, the SPD provides that “[a]ll attorney’s fees and court costs are the responsibility of the participant, not the Plan.” Id. at 19.
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204, 122 S.Ct. 708 (2002):
The Plan includes a reimbursement provision that is the basis for the present lawsuit. This provides that the Plan shall have “the right to recover from the [beneficiary] any payment for benefits†paid by the Plan that the beneficiary is entitled to recover from a third party. App. 58. Specifically, the Plan has “a first lien upon any recovery, whether by settlement, judgment or otherwise,†that the beneficiary receives from the third party, not to exceed “the amount of benefits paid [by the Plan] ··· [or] the amount received by the [beneficiary] for such medical treatment ··· .†Id., at 58-59. If the beneficiary recovers from a third party and fails to reimburse the Plan, “then he will be personally liable to [the Plan] ··· up to the amount of the first lien.â€
[Of course, the "personally liable" provision in the Great West plan is, as we now know, a non-starter. As the decision in that case determined, participants cannot be held personally liable for reimbursement.]
- Providence Health System-Washington v. Bush, 2006 WL 3249199 (W.D.Wash.) (November 8, 2006)
Situations may arise in which health care expenses are also covered by a source other than the plan. If so, the plan won’t provide benefits that duplicate the other coverage. For example, the plan won’t provide benefits that duplicate those available to a covered person under No-Fault motor vehicle or similar insurance, or through a state-sponsored program such as DSHS. If another plan is the primary payor, a copy of the other plans’ Explanation of Benefits (EOB) should be included with the claim you submitted to Providence Health Plan.
Third-Party Liability – If someone else is legally responsible or agrees to compensate you for injuries suffered by you or a family member, you will need to reimburse the plan for up to 100% of any benefits the plan paid in connection with those injuries. This reimbursement may be reduced in the same proportion by which the settlement, judgment or other recovery is reduced for payment of costs and attorneys’ fees reasonably incurred in obtaining that recovery.
Recovery of Excess Payments-Whenever payments have been made in excess of the amount necessary to satisfy the provisions of this plan, the plan has the right to recover those excess payments from any individual, insurance company, or other organization to whom the excess payments were made····
This language failed to sufficiently disclaim the make whole doctrine. [See, ::Subrogation Claim Reaches UIM Coverage But Fails To Avert Make Whole Defense]
The Court stated:
Nowhere in the plan language is there a suggestion, let alone a clear statement, that a plan beneficiary is signing away his or her make whole rights. Neither the make whole doctrine nor any euphemism sounding like the make whole doctrine is mentioned in the plan. Similarly, application of the make whole doctrine as a “gap filler†would not contravene any statement from the plan heretofore quoted to the Court by the parties.
