I’m making my belated return to Prawfsblawg . . . thanks to Dan and his crew for the re-invite.
Today’s Wall Street Journal had an interesting story about how health care plans are increasingly likely to invoke their contractual right to subrogation in instances where insureds successfully sue the tortfeasors who caused the injuries resulting in the medical treatment paid for by the health care plan. As is somewhat customary in these sorts of stories, the article opens with a sad story about a woman who was severely injured in a car crash and left needing nearly constant medical care. She received a settlement for almost $500,000, but it was placed in a trust for her medical care. (Her husband received a separate award of over $250,000 for his loss of consortium.) When the health care plan learned of the settlement, it sued the woman for recovery of medical expenses it incurred as a result of her treatment — something it was entitled to do (apparently) under the terms of the health coverage contract.
Told like this, the story looks ugly: big bad insurance company wants to take away money from the poor, still severely injured woman who needs the money to pay for her care. Who wouldn’t be sympathetic to her plight? And her husband’s? (Actually, ex-husband — he divorced her so that it would be easier for her to qualify for other public assistance.) I certainly felt bad for them.
And yet, I thought the health care plan had a valid point: the plan has a fiduciary duty to all members of the plan to recoup its expenses when lawfully entitled, so as to maximize the funds available for all members. Even the woman’s family conceded that the health care plan was entitled to recoup its expenses; they argued merely that under the circumstances, it should leave them with some funds to help take care of her.
Of course, this is hard to stomach given the tragic circumstances the woman and her husband find themselves in. But I see an (imperfect) analogy to the exclusionary rule — we want to focus on the big picture, not the individual case. Just as it is more important to suppress the evidence to deter police misconduct, etc. — even at the expense of setting free a factually guilty person — it may be more important to deny this poor woman’s family what they are asking for.
Posted by Tung Yin on November 20, 2007 at 02:40 PM
Comments
In Florida we have what is called equitable distribution. If, for example, the full value of the woman’s claim was $5 million dollars then her settlement is one-tenth of the full value. An equitable distribution would be one in which all those entitled to payment from the recovery get one tenth of the value of their claim, just as the woman got one-tenth of her claim. Generally negotiations between the party and the healthcare payor are part of the process of negotiating the overall settlement. Even Medicaid which is exempt from the equitable distribution rule will often negotiate reduced payment particularly in situation where but for the lawsuit there would be no money and Medicaid would have to write off any payment they made on behalf of the injured party.
The problem in the case described above may be that the healthcare payor was not notified pre-settlement and the attorney involved could not negotiate them into an equitable distribution.
Posted by: Jim Green | Nov 21, 2007 11:06:51 AM
Insurance companies in these cases often refuse to take into account the attorney’s fee. If the insurer paid $100,000 of medical expenses, it wants $100,000 from the settlement, even if the insured paid the lawyer 1/3 of the recovery (plus costs). Many insurers also demand first-dollar recovery, so they do not take into account what proportion of the settlement is fairly attributable to past medical expenses, as opposed to futures, lost income, pain and suffering, etc., which means they are not taking into account that a settlement is a _compromise_ of a disputed claim.
If the insurer has already spent $500,000 on this woman’s care, it’s likely that her future medical expenses will be staggering, and a lot of that long-term care will not be covered by health insurance. She surely lost income, suffered pain, etc. She paid something close to $200,000 in fees and costs, and the $500,000 settlement must have reflected a hefty discount for the possibility of losing at trial. Yet the insurer appears to be demanding the full amount.
Is that all okay just because there’s a subrogation clause in the contract? If the coverage was through an employer, the health plan is a contract of adhesion that is construed in favor of the drafter, thanks to ERISA and the “discretion” of the plan administrator.
Posted by: Jennifer Hendricks | Nov 20, 2007 11:06:04 PM
What may make this especially sad is that the settlement amount actually may have reflected the availability of insurance. If the injured woman’s lawyer expected the insurer to seek reimbursement of medical expenses, she may have demanded more. The trucking company lawyer may have said, “Well since you don’t need this settlement money for medical expenses, this amount is fair and sufficient.”
Posted by: Thaddeus Pope | Nov 20, 2007 6:14:09 PM
Well, I think it’s really more like “KKHHHAAAAANNNNNNNN!!!!!!!” but yes, I am a Trek nerd.
Posted by: Tung Yin | Nov 20, 2007 2:44:27 PM
Tung — I take it from your title that this is the “Khan” argument?
Posted by: Paul Horwitz | Nov 20, 2007 2:42:28 PM