ERISA Reimbursement is the terminology utilized to describe an ERISA Plan’s effort to require that it be paid back for medical bills expended on behalf[1] of a Participant or Beneficiary[2] of the ERISA Plan. The concept of “reimbursement” can be traced to the traditional doctrine of “Subrogation,” but it exists today without the traditional safeguards established in the development of the law concerning subrogation. When an insurer pays a claim to an insured, the insurer generally has the right to “step in the shoes” of the insured for the purpose of recapturing that money by pursuing a claim against the tortfeasor who may be liable for the loss.[3] An ERISA plan’s “right of reimbursement” is essentially a subrogation claim. Although there are subtle legal distinctions between “subrogation” and “reimbursement,” these devices are essentially the same.
Unfortunately, there is little or no oversight on the ability of ERISA Plans (and their insurers) to pursue reimbursement claims. Historically, subrogation actions were limited at common law to matters involving property damage claims, with subrogation on personal injury claims being specifically prohibited.[4] Authority for “ERISA reimbursement" claims is attributed to federal preemption under the auspices of ERISA which was enacted in 1974. At the time ERISA was enacted by Congress, however, subrogation for health insurers was uniformly prohibited in the United States. Such claims were deemed unlawful in all jurisdictions.
The first reported judicial decision involving an effort of a health insurer to seek subrogation on a personal injury claim is the 1982 decision in Frost v. Porter Leasing Corp., 436 N.E.2d 387 (Mass. 1982) in which subrogation was denied. “ERISA reimbursement” claims began arising in the late 1980s and have been resisted by some federal courts.[5] According to industry statistics, ERISA plans and related insurers are collecting close to $1 billion per year through the seizure of tort recoveries or other contractual payments received by insured personal injury victims.[6] The plans tend to pursue reimbursement on a "first dollar priority" basis in order to maintain steady insurance premiums for their members.
References
^Roger M. Baron, Public Policy Considerations Warranting Denial of Reimbursement to ERISA Plans, 55 Mercer Law Review 595 (2004).
^The term “participant” is defined in 29 U.S.C. 1002 (7) and generally encompasses employees and former employees. The term beneficiary” is defined in 29 U.S.C. 1002(8) as “a person designated by a participant or by the terms of an employee benefit plan, who is or may become entitled to benefit thereunder.”
^Roger M. Baron, Subrogation: A Pandora's Box Awaiting Closure, 41 South Dakota Law Review 237, 238 (1996).
^Roger M. Baron, Subrogation on Medical Expense Claims: The "Double Recovery" Myth and the Feasibility of Anti-Subrogation Laws, 96 Dickinson Law Review 581, 583, notes 11-12 and accompanying text (1992).
^David M. Kono, Unraveling the Liningh of ERISA Health Insurer Pockets – A Vote for the National Federal Common Law Adoption of the Make Whole Doctrine, 2000 BYU L.Rev. 427 (2000). Roger M. Baron, Public Policy Considerations Warranting Denial of Reimbursement to ERISA Plans, 55 Mercer Law Review 595 (2004).
^“One of the largest private healthcare claims recovery services in the United States recovered $239.9 million in health claims in 2003. See Trover Solutions, Inc., Form 10-K (FY 2003) at 29. Based on the recoveries made by this service, it is estimated that more than $1 billion is recovered annually on behalf of all plans.” 2006 WL 467695, at footnote 37, page 15. Quoted material is taken from Amicus Brief filed by the US Chamber of Commerce, found at in Sereboff v. Mid Atlantic Medical Services, Inc, 126 S.Ct. 1869, 74 USLW 4240, 164 L.Ed.2d 612, (May 15, 2006).
