ERISA Liens and Reimbursement Claims

Against Personal Injury Settlements:

Negotiating and Resolving Claims Maximizing Settlement Awards by Narrowing the Claim and Challenging Unreasonable Charges

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THURSDAY, JUNE 11, 2015

Presenting a live 90-minute webinar with interactive Q&A

Andrew D. Myers, Attorney, Law Offices of Andrew D. Myers, North Andover, Mass. & Derry, N.H.

Brett Newman, Managing Partner, The Lien Resolution Group, West Nyack, N.Y.

Franklin P. Solomon, Founding Partner, Solomon Law Firm, Cherry Hill, N.J.

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“LIENS” AND THE LAW IN

PERSONAL INJURY PRACTICE ISSUES IN LITIGATION & SETTLEMENT

Franklin P. Solomon, Esquire Brett Newman

SOLOMON LAW FIRM, LLC LIEN RESOLUTION GROUP

Cherry Hill, NJ Bnewman@helpwithliens.com

MEDICARE

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Medicare Secondary Payer Act

42 U.S.C. § 1395y(b)(2) - (8)

Effective 12-5-1980

Date significant for exposure/ingestion claims

Substantially modified by the Prescription Drug and Medicare Improvement Act of 2003

Now includes Section 111of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA)

Reporting requirements for Responsible Reporting Entities (“RREs”)

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MSP Liability

Repayment required

A primary plan, and an entity that receives payment from a primary plan, shall reimburse the appropriate Trust Fund for any payment made by the Secretary under this subchapter with respect to an item or service if it is demonstrated that such primary plan has or had a responsibility to make payment with respect to such item or service.

42 USC § 1395y(b)(2)(B)(ii)

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MSP Liability

Action by United States

The United States may bring an action against any entities required or responsible to make payment with respect to the item or service under a primary plan.

Includes insurer, self-insurer, TPA, employer sponsor of a group health plan, large group health plan, or otherwise

The United States may collect double damages against any such entity and may recover from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.

42 USC § 1395y(b)(2)(B)(iii)

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MSP Liability

Private cause of action

There is established a private cause of action for

damages (in an amount double the amount

otherwise provided) in the case of a primary plan

which fails to provide for primary payment (or

appropriate reimbursement).

42 USC § 1395y(b)(3)(A)

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Claim Reduction

MSP claims are automatically reduced by a

proportionate share of attorney fees and litigation

costs.

Provide documentation with Final Settlement Detail.

Once Settlement Detail is submitted, Medicare will issue

its initial determination and demand.

42 CFR § 411.37

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Recent Case Law

Bradley v. Sebelius,

621 F.3d 1330 (11th Cir. 2010)

Hadden v. United States,

661 F.3d 298 (6th Cir. 2012)

Taransky v. Secty, U.S. Dept. of Health & Human Svcs.,

760 F.3d 307 (3d Cir. 2014)

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MEDICARE SET-ASIDES

Considering Medicare’s Interest

Workers Compensation

Third-Party Liability

ANPRM 6047 Withdrawn 10-8-2014

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MEDICARE SUBSTITUTE PLANS

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MEDICARE SUBSTITUTE PLANS

(Medicare Advantage)

Medicare Advantage (formerly Medicare+Choice)

is privately issued insurance subsidized by the

government, offered in lieu of “traditional”

Medicare.

MA plans typically offer additional benefits, such as

expanded medical expense and prescription drug

coverage.

MA plans are specifically governed by Part C of

the Medicare statute

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MAO as Secondary Payer

Where payment would be secondary under the Medicare Secondary Payer Act, a Medicare Advantage organization may charge, in accordance with the charges allowed under a law, plan, or policy described in such section—

(A) the insurance carrier, employer, or other entity which under such law, plan, or policy is to pay for the provision of such services, or

(B) such individual to the extent that the individual has been paid under such law, plan, or policy for such services.

42 USC § 1395w-22(a)(4)

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Care Choices HMO v. Engstrom,

330 F.3d 786 (6th Cir. 2003)

Part C statute does not create a private cause of

action to enforce reimbursement claims.

Part C statute does not confer any affirmative right

to reimbursement; any reimbursement claim must be

based on contract provision.

See also Nott v. Aetna, 303 F.Supp.2d 565 (EDPA 2004)

Comment: To the extent MA plan contract may require

reimbursement, it is limited by the Part C Secondary

Payer provision.

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Parra v. Pacificare of Arizona, Inc.,

715 F.3d 1146 (9th Cir. 2013)

Reiterates holdings of Engstrom and Nott.

Neither statutory reference to MSPA nor 42 CFR

§422.108(f), granting MAOs “the same rights to

recover … that the Secretary exercises,” create

any substantive right to a private cause of action.

Medicare Act does not authorize creation of a

common law of subrogation for plan claims.

18

In Re Avandia,

685 F.3d 353 (3d Cir. 2012)

Cert. denied, 133 S.Ct. 1800, sub nom

GlaxoSmithKline, LLC v. Humana Medical Plans, Inc.

(2013).

Allows MAOs to access “private cause of action”

provision under MSPA, 42 U.S.C. § 1395y(b)(3)(A).

By its terms, private cause of action is exercisable

only against a “primary plan” that has failed to

make payment.

But see Collins v. Wellcare, 2014 WL 7239426 (E.D. La.)

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Employee Retirement Income Security Act of 1974

ERISA

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ERISA Liens?

THERE IS NO SUCH THING AS AN “ERISA LIEN”

• ERISA is silent on liens and creates no

reimbursement rights for employee benefits plans

• Almost every health plan issued as an employee

benefit is subject to ERISA – but some are not.

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ERISA Exclusions

ERISA specifically excludes from coverage:

any employee benefit plan if--

(1) such plan is a governmental plan ....

(2) such plan is a church plan ....

(3) such plan is maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation or disability insurance laws;

(4) such plan is maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens; or

(5) such plan is an excess benefit plan and is unfunded.

29 USC Sec. 1003(b)

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“Governmental Plan”

Federal government (e.g., FEHBA, Tri-Care)

State & municipal government

Railroad Retirement Act

Indian tribal government

where substantially all work is in essential governmental

functions, not in commercial activities

29 USC Sec. 1002 (32)

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“Church Plan”

“Church plan” is a plan maintained by an organization to provide employee benefits if such organization is controlled by or associated with a church.

“Employee of a church” includes an employee of an organization which is exempt from tax under section 501 of the IRC and which is controlled by or associated with a church.

29 USC Sec. 1002 (33)

May include hospitals, nursing homes, schools, colleges

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Express Preemption: ERISA § 514

FMC Corp. v. Holliday, 498 U.S. 52 (1990)

Insured plans indirectly regulated by state law regulating the plans’ insurers

Self-funded plans exempt from state insurance regulation; not altered by state law

What’s a self-funded plan?

Look at each plan component

Stop-loss insurance?

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Complete Preemption: ERISA § 502

Civil enforcement A civil action may be brought by:

502(a)(1)(B): a participant or beneficiary to recover benefits due under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify rights to future benefits under the terms of the plan;

502(a)(3): by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan

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PLAN SUBROGATION &

REIMBURSEMENT RIGHTS

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The Insured Plan

Most states have adopted anti-subrogation rules or doctrines precluding reimbursement

Extent of prohibitions varies state to state

MT constitutional protection

NJ prohibited as a function of collateral source statute

NY statute prohibits claims by insurers

PA presumes settlement is full recovery

Many states allow for contracting out of anti-subro doctrines

A few states have not adopted made-whole or other anti-subrogation law

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The Self-Funded Plan

Form 5500 and Schedule A

Plan Document v. SPD

Cigna v. Amara, 563 U.S. ___, 131 S.Ct. 1866 (2011)

Subrogation v. Reimbursement

Interpreting the contract clause

Plan year and date of injury

Conditional language

Abrogating the made-whole doctrine

6th, 9th & 11th Circuits require explicit language

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Actions Under ERISA 502(a)(3)

Federal jurisdiction is exclusive

Allows only “appropriate equitable relief” to

enforce plan terms

US Airways v. McCutchen, 133 S.Ct. 1537 (2013)

Unjust enrichment not a defense to plan contract term

“Background equitable rules” apply if not expressly

contradicted by contract term

Made-whole doctrine

Common-fund doctrine

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Requesting Plan Documents

Request must be to Plan Administrator/Sponsor

Statutory responsibility to provide within 30 days

$110/day civil penalty available for non-compliance

29 U.S.C. § 1024(b)(4); 29 CFR § 2575.502c-3

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What to request?

Plan Document (written instrument pursuant to 29 U.S.C. § 1102) in effect on date of injury;

Any document amending, supplementing, or otherwise modifying the Plan Document;

Summary Plan Description and employee benefits booklet in effect at the time of injury

All documents issued subsequently during any year in which benefits were paid

SPD Wrap Documents

Bargaining Agreement, Trust Agreement, Contract etc. under which Health Plan is established

Trust Agreement or other document establishing funding for the Plan

Annual Return/Report (IRS/DOL Form 5500), including all attached Financial Schedules

Administrative Services Agreement with any Third-Party Administrator for the Plan

An affidavit from the Plan Administrator attesting to self-funded status of the Plan

Complete statement of benefits paid to or on behalf of claimant/beneficiary

Specific plan component(s) paying benefits (e.g., health, dental, vision, AD&D, disability, etc.)

“Stop-loss” or excess/re-insurance coverage (insurer, policy numbers and attachment points)

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SPD as Plan Document?

Named fiduciary/ies with authority to control and manage operation and administration of the plan

Procedure for establishing and carrying out a funding policy and method

Procedure for allocation of responsibilities for the operation and administration of the plan

Procedure for amending the plan, and for identifying persons who have authority to amend

Basis on which payments are made to and from the plan

29 USC § 1102 - ERISA § 402

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Issues

Can SPD function as a § 402 Plan Document?

Can a Plan Document delegate authority to claims

administrator or SPD?

Do later amendments affect a plan’s subrogation/

reimbursement rights?

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Third-Party Recovery Clause

subrogation right

reimbursement right

first-priority claim

first-dollar recovery

lien

constructive trust

identified fund/amount

abrogate made-whole

abrogate common fund

conditional language

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Medicaid

Federal Employees Health Benefits Act (FEHBA)

Federal Medical Care Recovery Act (FMCRA)

(Military Personnel, Veterans, dependents/survivors)

OTHER HEALTH PLANS

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Negotiating Liens and Claims for Reimbursement with Private Health Insurers

Attorney Andrew D. Myers

Law Offices of

Andrew D. Myers

89 Main St., North Andover, MA

4 Birch St., Derry, NH

andrew@attorney-myers.com

No One Gets Paid Until Health Plan Gets Paid

Health Plan First

First Dollar Recovery

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Some States prohibit Subrogation

• By state statute, some states prohibit insurance companies from placing subrogation clauses into health insurance policies.

Look to statute and case law

• Example: Massachusetts statute and case law held to enforce full recovery to health care plan, rejecting payment of attorney fees or costs.

Pierce v. Christmas Tree Shops, Inc. , 706 N.E.2d 633 (1999)

State Law

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ISSUE:

Whether Health Care Plan, a lienholder under the medical lien statute [MGL c. 111, § 70a-70b] may be ordered to contribute to the attorney fees and costs incurred by the plaintiff in pursuing a tortfeasor.

FACTS:

Donna Pierce was injured on the premises of the Christmas Tree Shops store. The HPHC plan paid medical expenses of $10,165. Pierce brought suit in Superior Court. Settled before trial. Pierce brought motion in court to determine her obligations to HPHC seeking a compromise to the lien amount and an order requiring the plan to share attorney fees and costs.

HELD:

The statute does not require the lienholder to pay any portion of the plaintiff’s fees and costs.

Pierce v. Christmas Tree Shops

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1. INTAKE INTERVIEW

All health insurance cards

[Medicare-Medicaid-private-other?]

Summary Plan Description

If no SPD:

Signed authorization for copy

Alternative: client obtains

Copy of coverage selections page

all other insurance

Auto Insurance

Umbrella insurance?

Homeowners?

Practice Strategies

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2. EXHAUST ALL OTHER

MEDICAL INS. BENEFITS

Car Insurance:

No-Fault Benefits [“PIP”]

Med-Pay Benefits

Premises Liability:

Med pay

Get med pay info ASAP – often

early submission deadlines

Use these to “pay down” Health

Ins Lien

Practice Strategies

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3. OBTAINING THE LIEN

• Letter of representation and request

• Briefly describe type of injury & date of loss

• HIPAA compliant authorization

Practice Strategies

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1. 4. PARSING THE LIEN

2. After receipt:

3. Mail/email otherwise provide copy to client

4. Read lien itemization with client

5. Review line by line in person or at least on telephone

6. Is each item on lien solely related to injuries caused

by accident or other medical issues.

7. Send query/challenge to Health Ins.

PRACTICE STRATEGIES

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5. NEGOTIATING LIEN

Contest unrelated items : Insist unrelated

items deleted

Challenge questionable items, multiple

reasons for visits

Dispute excessive costs [3,000 for x-ray?]

Speak to decision makers

Use cool calm professional approach –

belligerence never helps

Account for comparative fault – likelihood

of success at trial

Tell “war stories” about losses. (Only time

in career to discuss cases lost)

PRACTICE STRATEGIES

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6. PRELITIGATION AGREEMENT

• Based on uncertainty of trial

• Attorney fee

• Costs

• Experts required

• Delay

• Signed writing acknowledging

agreement by Health Plan

PRACTICE STRATEGIES

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FIRST OFFER

Duty to communicate with client

Show lienholder actual 3D party analysis

STATUS OF NEGOTIATION

Notify lienholder with incremental offer increases

NEGOTIATE FINAL LIEN RESOLUTION BEFORE THIRD PARTY SETTLEMENT

After client signs release – no leverage against lienholder

Before settlement everything is contingent: leverage rests with client and attorney over whether or not they should accept onerous demands of lienholder

RESOLVE LIEN BEFORE SETTLEMENT

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Right of subrogation

Right of reimbursement

Enforcement of statutory lien

“Letter of Protection”

Other contractual right

What is It

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“By signing a letter of protection the lawyer is taking a position that is

potentially in conflict with the client’s stated interest.”

Another Look at Letters of Protection, Minnesota Lawyer, Aug 5. 2002.

For thorough treatment of “ethical and legal pitfalls when asked to assist

clients in dealing with their difficult economic and medical issues in

personal injury cases” see:

A Florida Bar Board of Governors, Opinion 02-4, April 2, 2004.

Massachusetts case Gordon Chiropractic v. Pena, Salem District Court

Docket No. 9536-CV-0076

Letters of Protection

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Follow “Practice Strategies” in previous materials.

Notify health insurer of key events including trial ,

pretrial, mediation or other ADR. Invite to participate.

Alternative Dispute Resolution.

Interpleader of Health Ins. or Motion but only if case is

clear.

NEGOTIATION POINTS

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Notify client of existence of language in

health insurance contracts giving right of

reimbursement if they are injured by a

defendant and if they recover money

from that defendant.

Make sure client understands up front –

early in case. Bad surprises blamed on

the attorney.

Paint insurer or plan as entity wearing

“black hat”. Attorney is only explaining

client‘s obligation to insurer.

Point out refusal to satisfy valid lien

endangers client’s future health benefits

and risks litigation by lienholder

CLIENT INVOLVEMENT

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Keep client informed as to possible outcomes. Encourage realistic

expectations. If lien is adequately sizeable to endanger most or all of

settlement/judgment, client should know. May effect incentive to

pursue case. Lienholder should be notified.

Provide literature regarding legal obligation underlying liens / rights of

recovery. Provides third party authority for counterintuitive idea they

have to pay an insurance company back.

Here’s mine, feel free to print and use: [next page]

CLIENT INVOLVEMENT

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LIENS ON PERSONAL INJURY CASES Like locks on a gate, liens prevent final settlement of personal injury cases until they are addressed.

http://www.attorney-myers.com/2013/01/liens-on-personal-injury-cases/

CLIENT INVOLVEMENT

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