This article was contributed by SRP to appear in a Coalition America's Online Savings Chronicle. It is re-printed below, in part.
For a moment, skip past best practices surrounding case identification, investigation, case management and attorney negotiation. While they are very important, what often matters most is the right plan language. Final recovery amounts on subrogation liens are significantly dictated by the strength or weakness of a health plan's subrogation / reimbursement provision. Carefully worded provisions are even more important in today's environment, where courts are somewhat divided on the extent of plan rights, especially for self funded ERISA plans.
The right plan language contains many key elements. In addition to declaring the plan's “equitable” right, a short list of other recommendations is below:
- Require a signed Reimbursement Agreement (RA) if your plan requires its completion as a condition of receiving benefits. Even though the Plan does not need the RA to assert its right, following plan language to the letter can only help clear the path to smoother reimbursement. Make sure the RA does not conflict with the actual plan document.
- Use the phrase "from any recovery, regardless of how the recovery is characterized." Broad language will help defeat opposing arguments that a recovery is insufficient or for pain and suffering only. Even better, add that "any recovery will be deemed as compensation for medical expenses."
- State that the plan receives payment first, before any other party. Further obligate the member to hold funds in trust until the lien is resolved.
- Use the phrase “any source” when describing the funds from which the plan will seek reimbursement. Limiting your right to “third party” recoveries may prevent recoveries from other sources such as under or uninsured motorist coverage in auto accidents.
- Include wording that make the member solely responsible for the costs of collecting from the responsible party. Specifically reject the Common Fund Doctrine, which allows a plaintiff attorney to reduce a lien by fees (typically one third of the lien) and costs. Specifically state that the plan will not pay any attorneys fees or costs.
- Include wording that seeks reimbursement regardless of whether the member has been fully compensated, or “made whole,” by their recovery. Specifically reject application of the Made Whole Doctrine, which allows a member to argue that no reimbursement is due because they did not obtain the full value of their injury. This element is especially important in policy limit situations.
Consider adding "offset" wording that allows the plan to offset any liens not reimbursed against any future medical claims.
Contact us for a copy of our recommended subrogation provision.