Pulling a Rabbit Out of a Hat: Navigating the nuances of Med-Pay, Health Insurance, ERISA Plan and Medicare recovery in work comp cases and related third party actions Presented by: Douglas Feldman, Esq. Chelsie Allan, Esq.

Right of Subrogation Evolved out of the equitable belief that the party that has caused a loss should bear the burden of that loss Public policy against double payment  An injured person should not recover twice for the same loss

Right of Subrogation Two types of subrogation  Contractual: rights conferred by contract  “Conventional subrogation”  Used by health insurers to subrogate themselves to the rights of the insured against the responsible party (often used in liability cases)  Equitable: principle of fairness  “Legal subrogation”  Based on principle of fairness  Most states recognize both types of subrogation

Right of Reimbursement Health Insurer’s contractual right of recovery against its insured  Arises only after the insured recovers from third party  Generally triggered in worker’s compensation cases  Group health policies often exclude payments for work-related benefits  Health insurer may voluntarily pay medical bills in disputed worker’s compensation case but still have the right to recoup such payments from the insured (some states require health insurer to pay bills in a disputed work comp case)

Right of Reimbursement, cont. Model Language  Includes both an exclusion of any work-related treatment as well as a solid reimbursement provision  Reimbursement provision should include reimbursement out of any award or settlement received, even if a claim settles on a disputed basis

Right of Reimbursement, cont. Exclusion language  This policy does not provide benefits for:  treatment of any bodily injury or sickness that is sustained by you or your covered dependent that arises out of, or as the result of, any work for wage, gain or profit Reimbursement language  If benefits are paid under this policy and you or your covered dependent recovers from a responsible party by settlement, judgment or otherwise, we have a right to recover from you or your covered dependent an amount equal to the amount we paid

Health Insurer’s Participation in Work Comp Cases: Intervention vs. Non-Intervention The majority of states do not allow group health carriers to directly intervene or participate in work comp claims  Must proceed against insured under a general breach of contract theory Some states entitle group health carriers to intervene and some even allow a right of subrogation to proceed directly against the employer

Intervention Best Practices Early identification of claim Put all parties on notice of lien File appropriate applications/documents to intervene (specific to each state)  Failure to timely intervene may extinguish a carrier’s right to recover Be aware of all dates Participate in settlement negotiations Have effective representation, not plaintiff’s counsel

Non-Intervention Best Practices Put all parties on notice of lien, including the Court Ask that the WC Court award reimbursement if claim is found compensable Know pre-hearing, hearing and settlement dates Keep up with developments in the claims process Be available for settlement negotiations Be persistent Follow through regarding enforcement of all policy provisions, including filing suit

Negotiating with Parties Prove your lien  Forward copies of documents establishing your lien  Forward pertinent provisions from policy. But be careful to search for policy provisions that limit insurer’s right to reimbursement  Discuss the facts of the case with the parties at an early stage  Request medical documentation to assess merits of claim (medical reports from both sides, doctors’ depositions/statements)

Settlement of Lien Argue merits of worker’s compensation claim Arguments for potential recovery:  Pro-rata reimbursement  Most effective way to resolve health liens  Parties agree to pay a proportion of its lien relative to the maximum value of the case  Made whole doctrine  Rely upon contract language and reimbursement clauses – allows for full recovery if insurer receives any settlement money  Argue that state common law subrogation rules do not apply in work comp so no made whole argument

Settlement of Lien, cont. Medicare Advantage Plans  Do Medicare Advantage Plans have a Superlien like other Medicare conditional payment liens?  If a Medicare Advantage plan makes payment where a primary payer was responsible, the Medicare Advantage plan has the same rights to recover from a primary payer (42 CFR § (f))  This right supersedes any state law or regulation, other than laws related to plan solvency (42 CFR § )  However, recent case law suggests Medicare Advantage plans lack enforcement rights

Settlement of Liens, cont. ERISA plans  Self-funded employee benefits plans are governed by ERISA, which preempts state laws that relate to any employee benefit plan  Have stronger rights of subrogation, but not necessarily reimbursement in work comp cases  Pro-rata reimbursement – best option for settlement

Agreements that try to Settle Around Health Insurer Limited Compromise  Settles everything BUT the group health or disability lien Language in settlement that injury is not work-related  Attempt to circumvent reimbursement/exclusion language in policy In some states, the judge will render findings that indicate the claim is not work-related in an attempt to get rid of health and disability liens to aid in settlement

Agreements that try to Settle Around Health Insurer Settle Primary Compensation and Try Issue of Medical Expenses Hold Harmless Agreements  WC Carrier agrees to indemnify and defend the employee against any claims for reimbursement from group health or disability carrier  Attempts to freeze group plans out of settlement  Often left out of settlement documents and not filed with the Court so hard for group plans to find out about

Negotiating Reimbursement: Dealing with Settlement Agreements What are the disputes?  Know the issues involved in the cases – issues of fact or medical issues?  Know the law in the applicable jurisdiction Make the wc carrier or employee argue the merits of the case Request copies of all medical reports and statements  Obtain copies of physician and IME reports  Review reports to identify pre-existing conditions, non-occupational causes, inconsistent medical histories, prior treatment Request analysis and valuation of case from both parties  If claiming medical bills are not related and/or reasonable or necessary, make them prove it Request copies of all settlement documents  Need to specifically request a copy of any hold harmless agreement as this may not be included in settlement documents

Negotiating Reimbursement: Dealing with Settlement Agreements, cont. Health insurers are not bound by the language in the compromise agreement  Do not just accept that a claim is not work-related simply because of the language in the compromise  If there is a compromise agreement, it means that an opinion has not been rendered by a court as to whether the claim is work-related  Any compromise entered into without a health insurer’s approval is probably a breach of contract  Many group policies allow for reimbursement if the member receives any settlement money, regardless of whether the settlement states that the claim is not work-related

Negotiating Reimbursement: Dealing with Settlement Agreements, cont. Use Hold Harmless Agreements to your Advantage  Hold Harmless Agreements = deep pockets  Request copies of settlement documents – specifically any hold harmless agreement  Often easier to get copies of documents from member than wc carrier  Follow through with enforcement of policy provisions, even if it means filing suit  WC carriers often ignore requests for reimbursement under a hold harmless  Filing suit will usually force a wc carrier to open their reserves

Third Party Actions Health Insurer v. Work Comp Carrier  Who has stronger right of recovery? Work with Member’s Attorney  Request for Admissions  Use to solidify recover right  Perfect your lien  Negotiate settlement of lien with member at outset of case dependent upon total settlement value

Summary of Best Practices Identify claim early Know the law in the applicable jurisdiction Put everyone on notice of lien Know merits of the claim Know your plan language Keep up with trial/hearing dates & deadlines Request and analyze medical and settlement documentation  Including hold harmless agreements Understand who you are negotiating with Have competent representation, not plaintiff’s counsel

Douglas Feldman Chelsie Allan Questions??