By Richard N. Shapiro and Patrick J. Austin
Whether you love it, hate it, or now have it, Obamacare (a.k.a. the Affordable Care Act) is the law of the land and it may impact you or your loved one’s personal injury claim. This hidden benefit has not been widely reported by the mainstream media.
Here it is: there is no duty to reimburse health insurance medical expense payments under Obamacare. To understand how huge this “hidden” benefit may be, read on.
Example 1: Imagine your 21-year-old child is covered under a health insurance plan through an Affordable Care Act (ACA) exchange. While away at college, your child gets hit by a drunk driver who runs a red light. To your shock, your child’s injuries require $300,000 in medical expenses at the hospital. The bills get paid under your child’s Obamacare health insurance. Later, you hire a personal injury lawyer. After a year, the case settles for $900,000. After paying the personal injury lawyer, there is no need to reimburse your health insurance company the $300,000 of medical expenses.
This example may end VERY differently if you currently have health insurance through your employer. Why? Because a majority of health insurance companies are set up to comply with a 1974 federal law known as the Employee Retirement Income Security Act (“ERISA”). This federal law allows an employer-based health insurance plan to recover all of the medical expenses it pays if you later recover a settlement or award through a personal injury claim.
Our law firm gets letters from these ERISA-based health insurance plans all the time and we investigate whether they comply with the law. If they do, we must negotiate to reimburse all, or the majority, of the medical expenses the health insurance company incurred. Therefore, under these ERISA plans, all of the $300,000 in medical expenses incurred by your child in the example above would be recoverable by the health insurance company. That’s a $300,000 difference!
If you were to try and challenge your health insurance company’s right to be reimbursed under ERISA, there’s a good chance you’ll lose. Take, for example, the Supreme Court’s 2013 decision in US Airways v. McCutchen. In this case, James E. McCutchen got his health insurance through his employer, U.S. Airways. He wound up suffering serious personal injuries in a car wreck. Mr. McCutchen used his health insurance and it paid $66,866 in medical bills.
Later, Mr. McCutchen filed a personal injury claim against the at-fault driver and recovered over $100,000 through the claim. Because of ERISA, the health insurance company sought to be reimbursed the $66,866 from Mr. McCutchen’s $100,000 settlement. Mr. McCutchen challenged this reimbursement request and argued that the health insurance company failed to take into account his costs for recovering the $100,000. The Supreme Court found that the health insurance company had a right to be reimbursed for the full amount it paid for the employee’s medical expenses.
With the passage of Obamacare, an unintended sea-change may be taking place in the realm of health insurance reimbursement. How? Well, ERISA only governs group plans sponsored by private employers. It does not govern individual health insurance plans. That means if you, or a loved one, purchased an individual health insurance plan through healthcare.gov, it is likely that ERISA does not expressly apply. Therefore, if you recover funds through a personal injury claim, the health insurance company providing you coverage likely does not have a right of reimbursement.
As more people get individual plans through the federal health insurance exchange, the percentage of people subject to ERISA’s reimbursement requirement will likely decrease. It’s quite possible that, at some point, the majority of Americans will have health coverage through the individual market, which could mean the ERISA health insurance reimbursement requirement could be headed for extinction. The process may be expedited as more states adopt health insurance exchanges.
As attorneys representing injured people, we fully support moving away from plans that have an ERISA reimbursement. Many of our clients are shocked to learn that, after paying their premiums, deductibles, co-pays, etc. their health insurance company still wants all the benefits repaid to the plan. It’s not fair, but the insurance companies got the reimbursement right built-in to the earlier 1974 ERISA law. But with this hidden Obamacare benefit, the pendulum of justice may be tilting towards the individual who only wants to keep the money they rightfully received through their personal injury claim.