ERISA, Part 2: The Bright Side of the Dark Side of Your Employee Health Plan

Finally, Part 2!  I've got my popcorn and I'm ready to learn more about ERISA.

And we're back!  I know you've been waiting with bated breath to hear about Part 2, and I really appreciate your patience.  When we left off, Joe's Jetta had smashed you into a guardrail, you opened a personal injury claim, and then discovered that your employee health plan, which is presumably governed by ERISA, might be able to recover the entire amount of any settlement or judgment that you might receive.

That's scary, I know.  But keep reading.  There are measures you can take to ensure that the Plan doesn't get more than it's entitled to.  The idea is that the Plan is properly entitled to the money that the Plan spent for your medical treatment, but it isn't entitled to the money that you spent on co-pays, gas, foregone wages, and the like.  You should approach your claim with this objective in mind.  So what can you do to make sure that the right parties get the right amounts?

Let's do it.  What are the steps?

1. Check for self-funding.  It's crucial to start by checking to see whether the Plan is self-funded or insured.  Self-funded plans are those in which the Plan is funded entirely by the employer, and then pays employees' medical expenses out of the Plan itself.  Insured plans pay money to an insurance company, which in turn pays its own money for the Plan participants' medical expenses.  If the Plan is self-funded, then federal law (ERISA) preempts North Carolina law and the Plan is allowed to recoup all of its expenses, to the exclusion of other carriers, medical providers, attorneys, and even the Plan participant/beneficiary.  On the other hand, if the Plan is insured, then North Carolina law controls.  North Carolina happens to have a strict "anti-subrogation" law that prohibits insurance carriers from asserting a right of recovery against an insured's settlement or judgment.  That means that if the Plan is insured, it has no right (in North Carolina) to claim any part of your recovery.

There are a couple places you can look to figure out whether the Plan is self-funded or insured.  First, go to www.freeerisa.com and use the search bar to pull up your employer's Form 5500.  Go down to line items 9a and 9b, showing the plan funding arrangement and plan benefit arrangement, respectively.  Both line items will list four options; (1) Insurance, (2) Section 412(e)(3), (3) Trust, and (4) General assets of the sponsor.  If both line items have options 3 and/or 4 checked, then the Plan is self-funded and it can assert a right of recovery against your claim.  If not, then take a look at Schedules A or C, which should be attached to the Form 5500.  Find the Schedule A form for the health plan itself (sometimes there will be dental or vision plans that also have a Schedule A).  Part 1(a) should name an insurance company.  Part III(8) has a box 8(a), in which only the "Health" option should be marked.  If there are any other boxes marked under box 8(a), then the Plan is insured and they can't touch your recovery.  Note that the "Stop Loss" box may have separate ramifications.  Stop-loss insurance is likely the topic that the judiciary will tackle next, and I'll cover that issue on this blog in the near future.  If there isn't a Schedule A, then check Schedule C and look for language that would pertain to the involvement of an insurance company.

The Form 5500 and its attendant schedules will typically answer the question of whether the Plan is self-funded or insured.  But if they don't, you can find out by looking at a bevy of other documents.  These include the Summary Plan Description (SPD), the Plan itself, the most recent Summary Annual Report, the most recent Terminal Report, the Bargaining Agreement, and the Trust Agreement.  You can normally get these documents from the Plan Administrator.  If you don't know who that is, talk to your Human Resources Department; they should be able to point you in the right direction.

2.  Equitable defenses.  If you haven't noticed already, we're getting into more lawyerly territory than I normally do on this blog.  If you feel like you're out of your depth, you absolutely need to go talk to an experienced personal injury attorney.  Seriously.  You don't get a second chance if you screw this up.  With that being said, even if the Plan is unequivocally self-funded, there are still arguments that you can make for reducing the Plan's right of recovery.  

For instance, you can look at the Plan language and make an argument that it doesn't expressly authorize the Plan to seek recovery against a third-party settlement or judgment.  Though this is rare, you should review the language to make sure.  In addition, you could make an argument that the Plan is only permitted to recover from funds that are designated as recompense for medical expenses.  In theory, this would preclude the Plan from recovering the other funds that reflect your pain and suffering, out-of-pocket expenses, and so on.

3. Reductions.  Look through the medical records and expenses that the Plan is claiming were related to the accident.  If the Plan is claiming unrelated expenses, let them know which expenses aren't related.  If you can convince the Plan that this is the case, it will reduce the amount of recovery that the Plan can pursue.

4. Good old-fashioned arguing.  Employee health plans, by and large, are interested in getting their money back.  But if they're trying to claim your entire recovery amount, then what's the point of your pursuing the claim in the first place?  If you decide to drop the whole thing, the Plan will take nothing.  Let them know that they can agree to only take part of the recovery, or you'll walk.  This argument can be availing where the facts aren't on your side.  

This sounds like a whole thing.

I want to reiterate strongly that both ERISA and the employee health plans that it governs are extremely complicated.  Moreover, there are a steady stream of court decisions that constantly change the ERISA landscape.  If you don't feel a thousand percent confident in your abilities, stop reading now and go talk to a personal injury lawyer.  That said, you do have options for trying to minimize or even eliminate your Plan's right to recovery under ERISA.  Just because your medical expenses were covered by the Plan doesn't mean that you're completely out of luck.