Court enforces health plan's right of reimbursement; plan grabs employee's accident recovery
Kyle Moore was hurt in a 2007 car accident. Through his father, he was a covered beneficiary with the ERISA National Elevator Inc. Health Benefit Plan [hereafter NEI]. The ERISA plan paid a little over $34,000.00 in medical expenses. Meanwhile, Moore sued the at-fault. His claim was ultimately settled for $500,000.00. Under Ohio law, the at-fault Defendants were allowed to deduct from their award any payment Moore had received from any third-party insurance source and the latter was denied any right of subrogation. NEI sued, arguing that the latter state law rules were preempted by ERISA rules granting NEI a "reimbursement" lien on the recovery.
Moore's attorneys argued that the Summary Plan Description [SPD]of the NEI plan, which contained the right of subrogation and reimbursement, was inconsistent with the actual plan governing documents, and that in any event the Ohio law extinguished any subrogation claim that NEI might have enjoyed. The Court rejected this analysis. It held that the SPD was in fact the controlling plan document.
The Court also held that NEI was entitled to full and complete reimbursement of its entire expense, and that Moore was entitled to keep settlement funds only to the extent that they exceeded the NEI lien: thus if the settlement had been for $34,000.00, total, NEI would be entitled to claim the entirety of it and Moore would be entitled to nothing--regardless of the severity of his injuries, his wage loss, or the compromise of his quality of life.
While the Court's decision seems a fair and appropriate result in Moore's situation-- because his ultimate recovery substantially exceeded his out-of-pocket medical expenses and the NEI lien-- the outcome is far more troublesome in most cases. In most cases, the ultimate recovery of an injury victim is substantially limited by insurance coverage and "collectability," and the out-of-pocket medical expenses are proportionately much greater. As a result, in most cases, the victim of a particularly severe injury is victimized a second time when his entire recovery becomes the property of the entity that financed his medical care.
Under the Court's analysis, the health insurer/ERISA plan manager is allowed to stand back and wait--and then seize the victim's entire recovery without paying any litigation expenses, without paying any attorney fees, and without recognizing that the victim has suffered a lifetime loss of income and normal enjoyment. Since the ERISA plan's right is unencumbered by any exceptions or limitations, the plan is under no pressure to compromise it's rights to achieve a balanced or reasonable allocation or outcome.
Ultimately, this is simply another example of how the escalating cost of medical care and special interest influence are threatening the well-being of ordinary people in the United States. Courts and legislators are willing to grant any accommodation to insurers and willing to impose any duties on consumers if the ultimate effect may be a slight downward influence on health care costs--even if the impact is an unreasonable burden on an individual or group that lacks influence.