Due to rising healthcare costs and utilization, health plan premiums in the United States have skyrocketed. These high costs impact benefits, premium contributions, jobs and wages for both employees and employers.
When individuals suffer serious illness or injury due to dangerous pharmaceuticals, defective medical devices or toxic exposures, healthcare funds and plans are required to pay for the corresponding medical care of their participants. These claims adversely impact utilization and premiums.
Subrogation is the recovery, from a third party, of medical costs that were originally paid by a benefits plan. Subrogation is a significant piece of the health claims puzzle. It allows the liability associated with payment of medical costs to be shifted to the appropriate party, allowing health plans to maintain premiums.
Health plans and insurers unnecessarily pay medical expenses related to claims caused by defective or dangerous products. Subrogation tends to be underused and typically pursues claims in the areas of automobile insurance, workers compensation, property insurance, or by health insurers and plans for easily identified third party claims.
Unfortunately, health payers and plans typically lack the necessary tools to identify and pursue recovery opportunities in high cost complex claims involving harm caused by dangerous drugs and medical devices or toxic chemicals. Contingent upon the size and make up of a particular plan, the cumulative effect of these costs can be significant in terms of a plan’s claims and underwriting profile. Ultimately, an adverse impact to a plan’s utilization will affect the design of the plan, the benefits available to participants, and the cost of the plan for years to come.
Health benefits plans provided by employers and unions frequently contain a right of subrogation, allowing the plan to recover medical benefits given to an employee or participant if the employee has received a personal injury recovery from a third-party. Plans also frequently provide that if the employee’s or participant’s injuries were caused by a third party, no medical benefits will be paid at all unless and until the employee or participant agrees in writing to reimburse the plan for any recovery. These subrogation provisions, and the rights afforded to health benefit plans provided by employers and unions, are based on the Employee Retirement Income Security Act, 29 U.S.C. § 1001, et seq. (“ERISA”). ERISA is a comprehensive federal statute governing all employee benefits plans, including plans sponsored by employers and unions that provide medical benefits to employees. 29 U.S.C. § 1002(1) and (3). With certain exceptions, ERISA preempts state laws relating to employee benefits plans.
Plans that are funded by insurance companies may be subject to state laws that regulate the industry. If a plan is funded through insurance purchased by the employer or union, it will be treated as any other group health insurer for determining whether a subrogation claim is enforceable. These plans are routinely subjected to laws which may limit an insurer’s right to subrogation, or may limit or eliminate the insurer’s recovery opportunity. State laws which regulate insurance and limit a fully-insured plan’s recovery rights include the made-whole doctrine, the common fund doctrine, and anti-subrogation statutes. Although non-ERISA plans do not enjoy the benefit of ERISA preemption and may be subject to state laws, there remains significant recovery opportunities for an insurer or fully-insured payer who provides health care benefits to plans and participants in several jurisdictions.
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