When you get injured due to someone’s negligence, you will likely have medical bills to pay. Of course, if you are in compliance with federal law, you likely carry health insurance. There are a lot of different options for health insurance these days, ranging from public programs like Medicare and Medicaid to private health coverage through an employer group plan or through the healthcare insurance exchange.
If your health insurance pays for medical care related to your auto accident or other personal injury, then that insurance plan will have a right to be paid back from your settlement or judgment. Of course, this is not always a bad thing because chances are your health insurance gave you some deep reductions in your costs. Still, the fact remains that you and your Long Island personal injury lawyer should carefully weigh your options when negotiating a settlement, taking into consideration the amount that will be due back to your health insurer. One specific federal law has a big impact on your recovery – the Employee Retirement Income Security Act of 1974 (ERISA).
What is ERISA?
In a nutshell, ERISA is a federal law designed to protect employees of large companies. It was originally created to establish minimum standards so that individuals would have access to affordable and fair health plans. Sadly, these companies have utilized the law to turn it into an aggressive collections tool. Today, ERISA is used by large self-funded insurers to avoid preemption by state laws that could hinder their ability to recover monies paid on behalf of employees.
What is an ERISA Lien?
When your ERISA health plan pays for your medical care, it has a right to be paid back whatever it paid toward your care. That is, if you recover money from the at-fault party, then you must refund your health insurer.
Many health plans will use companies like Equian, First Recovery Group, Optum, and Rawlings Company, among others, to go after plaintiffs and their attorneys for payment of these liens. These companies will often cite language from ERISA that states that they (and their clients) are entitled to 100% of whatever the health plan paid, regardless of what you or your attorney recovery. However, this only tells part of the story.
Common Fund and Unjust Enrichment Claims
Most states, New York included, have specific legal principles, such as the theory of unjust enrichment and common fund doctrines. In short, if your Long Island accident attorney does all the work to collect the funds for the health plan, the law says that the health plan should share in the attorney’s fee, as it was a beneficiary of the attorney’s work. To allow the fund to recover 100% without paying part of the fees and costs associated with such collections would amount to unjust enrichment.
Unfortunately, federal courts have favored ERISA plans, saying they are not subject to state laws in this way. There are some limited exceptions, and your attorney can work with you to explain how you may still be able to reduce the impact of a true ERISA lien. However, the key is first determining if it is the right type of plan. In general, there are two kinds of employer group health plans – self funded and insured plans.
Self-Funded vs. Insured Plans
A self-funded plan is one where the employer pays to be part of an insurance group like Blue Cross Blue Shield, Aetna, Cigna, and so forth. The actual payments to doctors and hospitals are made directly from the employer’s pool. Premiums are collected through payroll and placed into a pool, from which expenses are paid. These plans are generally not subject to state laws.
An insured plan is what most of us think of when we think of employer-sponsored plans. Premiums are collected by the employer and passed to the insurance company, who in turn makes payments to providers directly. These plans are generally still subject to state law.
Is My Health Plan Covered by ERISA?
Only a small percentage of all employer health plans are truly covered by ERISA, yet almost all group plans use ERISA as a tool for collections. To know the difference, ask the following questions:
- Is your health plan directly funded by the employer? If the employer funds the plan, then it is likely a self-funded plan, not subject to state laws like the common fund doctrine.
- How large is the employer? If you work for a smaller employer, chances are it is not a self-funded plan. These are typically used by large companies.
- Do you work for the government? Most government employees are not self-funded ERISA plans.
Long Island Accident Attorneys – Keeping Your Money From a Personal Injury Case
Wondering if you have to pay my insurance company back? Well, it depends. Make sure to speak with a personal injury lawyer who understands ERISA liens. The Law Office of Cohen & Jaffe, LLP works hard to reduce the impact of healthcare liens and ERISA liens for our clients. The more we are able to save, the more you are able to keep. Speak to our skilled and experienced Long Island personal injury attorneys at 516-358-6900 or schedule an appointment online today.