Federal Law on Automobile Insurance Reimbursement

December 16th, 2013 by Rieders Travis in Car Accidents

For ERISA-qualified plans, ERISA preempted application of the anti-subrogation provision of the MVFRL. Other state laws are also pre-empted by ERISA. The anti-subrogation provision of the MVFRL precludes governmental healthcare plans (non-ERISA qualified plans) from exercising subrogation rights against a health care recipient’s tort recovery. HMOs are exempt from the anti-subrogation provision of the MVFRL.

Health insurance plan that requires the beneficiary to reimburse the insurer for its expenses when the beneficiary recovers damages from a third party that is responsible for the injury is “equitable” and permissible under ERISA. Insureds settled lawsuit suit with 3rd party for injuries resulting from accident. Mid Atlantic filed suit under ERISA to recover money it had spent on insureds’ medical expenses. Sereboff v. Mid Atlantic Medical Services, 547 U.S. 356 (2006). In US Airways, Inc. v. McCutchen, 663 F.3d 671 (3rd Cir. 2011 the health care plan sued to recover medical bills after settlement with the third-party. The court ruled that because the amount of the judgment obtained by the health care carrier exceeds the net amount of the automobile victim’s third-party recovery, it would leave him with less than full payment for his emergency medical bills, thus undermining the entire purpose of the Plan. At the same time, it would amount to a windfall for US Airways, which did not exercise the subrogation rights or contribute to the costs of obtaining the third-party recovery.

Where a summary plan description and a plan conflict, the summary plan will control if the employee has relied on the plan. Brush Wellman, Inc. v Montes, 295 F.Supp. 2d 785 (N.D. Ohio. 2003).

Evidence (and subsequent recovery in a personal injury action) of medical expenses arising from motor vehicle accident is admissible when injured party’s medical expenses were covered by his employer’s self-funded welfare and benefit plan. Orndoff v. Wilson, 760 A.2d 1 (Pa. Super. 2000)

Liens on medical costs are excepted from the anti-lien and anti-recovery provisions of the Social Security Act. Liens on settlements or judgments limited to medical costs are not prohibited by the Act. Pennsylvania’s 50% allocation and agency appeal provisions are consistent with the federal requirement that the State’s recovery not exceed the portion of the third-party recovery attributable to Medicaid-paid expenses. Pursuant to the current framework, beneficiaries unhappy with these results may appeal the default allocation.

ERISA liens are quickly becoming one of the biggest sources of frustration for personal injury attorneys. ERISA is the Employee Retirement Income Security Act of 1974, 29 USC 1001, et seq. which governs most employee health plans. Many ERISA plans assert that they are under no obligation to reduce their lien claims, and purport that they are entitled to their entire reimbursement claim regardless of the circumstances of the case. Needless to say, this does not bode well for clients, who may end up with very little out of their personal injury settlement, particularly if the third party has a limited policy.