Some of the most confusing laws have to do with health insurance and subrogation. ERISA may be the most complicated of them all. Basically, if you file a personal injury lawsuit, you may see ERISA as your biggest enemy. It is also why having an attorney who specializes in ERISA lien resolution is crucial.
This is because ERISA stands for Employee Retirement Income Security Act. When the law was passed in 1974, it was intended to protect employees. Originally, the government passed this act to make sure that employee contributions for health care and pensions were safe. Unfortunately, the law has morphed into something completely different than what it was originally intended for.
Now, ERISA is used by insurance carriers to recover the money spent on treatment for your personal injuries. When you get hurt in any sort of accident, you’ll probably suffer some serious injuries. You’ll need to go to the hospital and get medical treatment right away.
In a lot of cases, the only way for you to get this treatment is to rely on your personal health insurance. Even if someone else is responsible for your injuries, odds are, they’re not going to offer to pay for your medical care. Your personal health insurance will have to step up and cover your medical expenses.
For people who get their health insurance on their own, ERISA won’t apply. But most people get their health insurance through their employer. ERISA does apply to employee health plans. So, when your insurance company pays for the treatment for your accident injuries, they’re going to want to be paid back.
In order to recover compensation for your injuries, you’re going to do one of two things. First, you’ll file a claim against the defendant’s insurance provider. This could include any of the following:
- Workers compensation insurance
- General liability insurance
- Auto insurance
Most of the time, your claim will be paid within a couple of weeks. However, in many cases, the insurance company will deny your claim and refuse to pay. Your personal injury attorney will have to try to negotiate a settlement of your claim with the insurance adjuster.
If the insurance company refuses to pay, you’ll have no choice but to file a lawsuit against the defendant. Their insurance company will have to defend the lawsuit.
No matter which avenue you pursue to recover your damages, your health insurance carrier must be notified. Then they’ll sit back and wait until you settle or win your case to demand reimbursement. At this point, you need to contact Massive's private insurance and ERISA lien resolution attorneys to ensure you obtain the most favorable decision possible, allowing you to keep a larger portion of your settlement or insurance payment.
Do You Have to Reimburse the Insurance Carrier?
When you settle or win your lawsuit, you do have to reimburse the insurance carrier for the money they paid out. This has to be paid before anyone else is paid. In fact, you won’t have a choice. The carrier will place an ERISA lien on your judgment or settlement. This means they are legally entitled to repayment in order for you to receive your portion of the proceeds.
The question is, how much are they entitled to recover?
Generally speaking, they’re entitled to recover 100% of the money they paid out. As you receive medical treatment for your injuries, the insurance company will add the amounts they pay to their lien. Sometimes they include things that were not part of your personal injury case.
For example, you may have suffered a slip and fall at the grocery store. Perhaps you injured your neck and back. You’ll need tests such as x-rays and MRIs. You may even need surgery and physical therapy. The expenses for these things should be included in the ERISA lien.
However, the insurance company may include other things that aren’t related to your slip and fall injuries. Maybe you needed treatment for some other ailment that was discovered in the process of treating your slip and fall injuries but was not caused by it. This treatment would’ve been covered by your health insurance whether you had an accident or not.
This is why your personal injury attorney needs to look at each line item on the ERISA lien. Anything that isn’t related to your personal injury needs to be disputed. This could bring the amount of the lien down quite a bit, especially if a more serious issue was discovered in the process of treating your injury.
Does the Insurance Carrier Always Recover 100%?
Whether or not the insurance carrier can demand 100% reimbursement depends on whether you have a self-funded plan or regular health insurance. There’s a big difference between the two.
A self-funded plan is when you pay your employer premiums for insurance. Your employer pools all of the money they collect from employees and uses it to pay for medical care. It also uses this money to pay any insurance claims filed. These plans are used by large employees such as Walmart and Target.
Traditional health insurance plans are used by smaller employers who don’t have enough employees to create a pool of funds. They collect insurance premiums from their employees. They then pay insurance carriers such as United Healthcare these premiums. The insurance carrier is the one who pays claims and covers the employees’ medical expenses.
If you’re covered under a self-funded plan, federal law applies and an ERISA lien may be filed against your lawsuit. If you’re covered under a traditional insurance plan, state law applies and you may not have to pay back 100% of the expenses.
In reality, there are very few truly self-funded insurance plans. Most companies can’t afford the risk of using their own pool of funds to pay claims. One giant lawsuit or medical claim could eat up a large portion of these funds. So, chances are, your plan is insurance and not a self-funded plan.
Your personal injury lawyer needs to read the plan information to determine which of these two groups your case falls under.
What is the Law Regarding ERISA Liens?
The case that controls much of how ERISA liens work is US Airways, Inc. V McCutchen. This is an important case to understand.
In the McCutchen case, The Supreme Court stated that self-funded plans are entitled to full repayment under ERISA. They’re not subject to any state laws that limit the amount of reimbursement an insurance company can demand.
This means that if your health insurance is part of a self-funded plan, you’ll have to pay back 100% of the medical expenses. This is true even if repaying the plan means you are left with nothing.
The other important thing about a self-funded plan is that you can’t deduct your attorney fees from it. Normally, you can deduct the percentage of your lawyer’s contingency fee from the money paid back to health insurance. With self-funded plans, this isn’t the case. This means that the attorney fee portion will have to come out of your portion of settlement proceeds.
What Can a Lawyer do to Reduce the Required Reimbursement Amount?
There are a few things your personal injury lawyer can do to reduce the amount paid back to the insurance company.
First, he can check to see if your plan was self-funded or a regular insurance policy. If it’s an insurance plan, then only that part of your settlement designated as medical expenses can be used to pay back the insurance company.
The second thing your attorney will do is check the language of your policy plan. If it doesn’t specifically say what parts of your settlement will be used to pay back medical expenses, you can argue for no reimbursement.
Your attorney will also check to make sure the ERISA lien doesn’t include medical treatment not related to your personal injury case. If it does, he’ll challenge any line items that were unrelated.
Your attorney will also check to see if the plan specifically mentions whether attorney fees will come out of the reimbursement amount. If the plan is silent on this, he’ll argue that attorney fees will come out of any portion of the money used to reimburse the insurance carrier.
Finally, he can threaten that you won’t pursue your claim at all. If you’re not going to recover enough money to pay the entire ERISA lien, why bother pursuing the claim at all? If this happens, the insurance company will receive nothing. If you don’t sue, you won’t get a settlement or judgment.
The insurance company has an incentive to work with your lawyer. You’re not going to pursue a claim if it means you get no money. The whole point of hiring an attorney is to get compensation for your injuries. If the entire settlement will be swallowed up by the insurance company, why bother? Having a private insurance and ERISA lien resolution attorney fighting for you greatly improves your chances of keeping some portion of any settlement or jury award you may receive.
Contact a Subrogation Expert Today
If you’re in the middle of a personal injury lawsuit, you may run into ERISA lien issues. You want to have an attorney who understands how these matters work. Massive is exactly who you need to speak to in this situation. We are experts in dealing with private insurance and ERISA lien resolution and will work for the best resolution for you. The last thing you want to do is spend a year fighting to get paid for your injuries only to turn the entire amount over to the insurance carrier.
Keep in mind, your personal injury lawyer isn’t going to work hard on a case if he’s not going to get paid. Attorneys want to get you justice but they also need to pay their bills. If attorney fees aren’t taken out of the reimbursement monies, your attorney could end up with nothing.