:: Wal-Mart’s Subrogation Policies Return To Media Attention

The recent decision by Wal-Mart to drop its claims to reimbursement from Deborah Shank’s personal injury recovery has led to inevitable speculation about the reason for the decision as well as the broader implications for other cases. (See, Brain-damaged woman at center of Wal-Mart suit)

My friend Roger Baron, professor of law at the University of South Dakota, who assisted the Shanks in the legal proceedings has been quoted in the Wall Street Journal as hopeful that the corporate decision will have a wider impact on reimbursement practices by other health plans.

As to the rationale for the decision, one can choose from the proffered reason in Wal-Mart’s letter to the Shanks, or a cynical assessment that the change of heart derives from publicity concerns. (See Jeff Mehalic’s post at West Virginia Business Litigation and Brian King’s post on his blog with the media cites).

Here’s Wal-Mart’s explanation –

Occasionally others help us step back and look at a situation in a different way. This is one of those times. We have all been moved by Ms. Shank’s extraordinary situation. Our current plan doesn’t give us much flexibility, so we began reviewing the guidelines for the trust that pays medical costs for our associates and their family members.

We wanted to understand the ongoing impact of any potential changes to the trust, and ensure that any action we take is in the best interests of our associates and their family members who participate in and contribute to our plan. We have decided to modify our plan to allow us more discretion for individual cases, and are in the final stages of working out the details.

Wal-Mart will not seek any reimbursement for the money already spent on Ms. Shank’s care, and we will work with the family to ensure the remaining amounts in the trust can be used for her ongoing care.

We are sorry for any additional stress this has put on the Shank family.

Here’s the alternative view (from the WSJ Law Blog) –

And what to make of Wal-Mart’s motives? Lynn Dudley, vice president for policy at the American Benefits Council in Washington, D.C., told the AP that the negative publicity around the case was beginning to draw the attention of lawmakers who might want legislation to stop or limit subrogation.

As one considers the broader questions, sometimes the analytical details escape notice. Suzanne L. Wynn, Esq. asks a very lawyerly question that takes the issue back to the empirical realm.

CNN is also reporting as part of this story that Walmart is amending their plan to allow more discretion in individual cases. If anyone has a copy of the amendment and could send it my way, I would really appreciate it. Under ERISA, I am curious about how much discretion they could be amending into their plan.

I do not have the answer to this question, but perhaps some recent cases involving the pugnacious retailer will be of service here. Wal-Mart’s plan evidently has the standard grant of discretion to the plan administrator. Consider this finding from the Eighth Circuit’s opinion in Associates’ Health and Welfare Plan v. Gamboa, 479 F.3d 538 (8th Cir. 2007):

The Plan Wrap Document gives the Administrative Committee, as the plan administrator, complete discretion to interpret the terms of the Plan. Accordingly, we are limited to reviewing the Administrative Committee’s interpretation of the Plan for an abuse of discretion.

Is it likely that Wal-Mart will remove this grant or circumscribe it in some way so as to trigger de novo review of the plan administrator’s decisions? Not a chance.

Nor do I see Wal Mart as likely removing or modifying its subrogation provision.

The Plan has the right to … recover or subrogate 100 percent of the benefits paid by the Plan on your behalf … to the extent of … [a]ny judgment, settlement, or any payment made or to be made, relating to the accident…. These rights apply regardless of whether such payments are designated as payment for … [m]edical benefits [or] [w]hether the participant has been made whole (i.e., fully compensated for his/her injuries)…. The Plan has first priority with respect to its right to reduction, reimbursement and subrogation.

And for a very sensible reason. If they did not have that provision, then the plan would be subject to the amorphous “make whole” doctrine of the various jurisdictions imposing that as a default rule.

The short take on the Wal-Mart decision, in my opinion, is this:

The plan document was not the constraint suggested by Wal-Mart, but rather a makeshift argument to deflect responsibility for Wal-Mart’s aggressive stance in the Shank case. The abuse of discretion standard is broad enough to permit a uniform, yet flexible, rule of reason embodied in a set of protocols that address extenuating circumstances, e.g., where liability coverage is insufficient. Their approach in all things legal, however, has been monolithic and dogmatic to a fault. (See, e.g., Will New Wal-Mart Policy Help Catch More Drunken Drivers?)

Whether Wal-Mart actually intends to institute any changes in its approach remains to be seen. A good marker for that might be to examine whether it accords any similar concessions after its recent victory in Administrative Committee for Wal-Mart Stores, Inc. Associates’ Health and Welfare Plan v. Horton, 513 F.3d 1223 (11th Cir. 2008). (See, :: Eleventh Circuit Holds Conservator Proper Defendant In ERISA Health Plan Subrogation Litigation)

In any event, I seriously doubt any policy changes will require revision of their trust’s plan documents.

Note: For my views on the economic utility of subrogation, see :: Allocating The Costs Of Life’s Misfortunes – Another Look At ERISA Health Plan Subrogation

While we cannot provide a solution that will please all parties, it is helpful to recognize that the issues in dispute are economic ones. While employer plans may be the payers of first resort, that does not logically entail that they must be the payers of last resort. Economic distortions such as this obscure the problem of funding the U.S. health care system – a problem that no political candidate has a real answer for at present.

Group health plans should adopt protocols that address the regularly recurring instances of limited liability or insurance coverage. This should form a part of the ERISA fiduciary’s due diligence program.

3 thoughts on “:: Wal-Mart’s Subrogation Policies Return To Media Attention

  1. Just a thought, but couldn’t “has a right to” be construed as being closer to “may” than “shall”? What do you think are the chances that the “has the right to” could be interpreted to give the Plan Administrator that discretionary wiggle room to NOT pursue the reimbursement?

  2. Help me understand this. Employee gets hit by drunk driver and permanently injured. Employee’s company pays medical expenses. Employee sues drunk driver and wins money. Why doesn’t the employer have a right to get their costs the employer incurred from the accident? It seems to me that all the media attention points to Big-Bad-Walmart whereas someone should point to Shank’s attorney, who, with the simple use of a calculator could have factored in the amount that Walmart was due. Notice Shank’s attorney got his entire share from the recovery and no one parades him in the press……

  3. Jenna, I think your point is valid. One observation – I don’t know what the policy limits were in the case – if they were exhausted, then the calculator does no good.

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