The U.S. Supreme Court ruled unanimously on May 15 that health plans can ask for reimbursement when another party pays for the cost of an injured plan member’s care.
The ruling means that health carriers can continue to use “acts of third parties” policy provisions, or “subrogation” provisions.
The provisions give a carrier the right to try to recover cash it pays for treatment of an injured plan member by sharing in the member’s lawsuit settlements or court awards.
America’s Health Insurance Plans, Washington, joined with the National Association of Manufacturers, Washington, and the American Benefits Council, Washington, to support the carrier involved in the case, Sereboff et ux. v. Mid Atlantic Medical Services Inc.
“We’re gratified by the court decision,” AHIP spokeswoman Susan Pisano says. “This is a case that has to do with contract provisions in health care insurance that help keep health care affordable for consumers.”
The petitioners in the case, Dr. Joel Sereboff, a psychologist, and his wife, Marlene, were involved in an automobile collision in 2000. Mid Atlantic Medical, Bethesda, Md., spent about $75,000 on paying their collision-related medical bills. After the Sereboffs received a $750,000 lawsuit settlement, Mid Atlantic told the Sereboffs they had a legal obligation to reimburse the company.
The Sereboffs set $75,000 aside while opposing Mid Atlantic’s claim.
The Sereboffs argued that they should not have to reimburse Mid Atlantic Medical, which is now part of UnitedHealth Group Inc., Minnetonka, Minn., because the settlement was supposed to make them whole and was not necessarily supposed to be compensating them for past medical expenses.
AHIP, NAM and the ABC wrote in the brief they filed in support of Mid Atlantic Medical that employee health benefit plans governed by the Employee Retirement Income Security Act collect hundreds of millions of dollars or more each year through reimbursement recovery mechanisms.
“The ability of ERISA plans to seek reimbursement of benefits from plan participants who have recovered funds from third parties is important to their continued financial security,” the groups wrote in their brief.
A ruling in favor of the Sereboffs would increase plan expenses and let injured plan members be enriched unjustly by keeping double recoveries, the groups wrote.
The trial court ruled in favor of Mid Atlantic, and the 4th U.S. Circuit Court of Appeals upheld the trial court decision.
In 2002, the Supreme Court ruled against Great-West Life and Annuity Insurance Company, Greenwood Village, Colo., when Great-West tried to collect reimbursement from a woman who was left paraplegic by a serious accident. In that case, the funds awarded to the woman were placed in a “special needs trust” and were not in the woman’s possession.
Chief Justice John Roberts, the author of the Sereboff opinion, writes that Mid Atlantic was in a stronger position than Great-West because it was trying to recover from a specifically identified fund within the control of the Sereboffs.
The court holds in the opinion that a benefit plan fiduciary may bring a civil action to bring equitable relief to enforce the terms of the plan and that Mid Atlantic’s claim is an equitable claim.
A copy of the Sereboff opinion is on the Web at Document Link.