Health Insurance Reimbursement in New York Personal Injury Cases15 Jan
If you receive a settlement or a court award in a personal injury case, your health insurance company may want you to reimburse them for medical expenses paid on your behalf. It is important to know that New York law limits which companies qualify for reimbursement and that there are ways to reduce the amount of the reimbursement.
Health Insurance Liens and Subrogation Claims on Personal Injury Settlements
If you receive a settlement or court award for a personal injury case (e.g., a car accident or slip and fall case), your health insurance company may seek repayment for medical expenses it covered for you. It is important to know that in New York, not all health insurance plans qualify to receive reimbursement.
Most health plans build into their policies a “right of subrogation” if one of their insured is injured because of another party and the health plans pay for medical treatment related to that injury. The right of subrogation means the health insurance company can seek reimbursement if you receive a settlement or award. The right of subrogation also means that if you do not pursue a settlement, the health insurance company can pursue one in your name to collect the money they paid out for you.
If you suffered an injury, your health insurance company may send you a questionnaire to determine if you are pursuing a personal injury claim. They also may send a direct notice informing you that they intend to seek reimbursement. Most health plans will contract with a third-party company (e.g., The Rawlings Group) to pursue cases when they feel entitled to reimbursement.
If you seek or receive compensation for an injury, the health insurance company can assert a lien on your case. A lien obliges your attorney to make a payment on the money owed out of any settlement or court award you receive. The lien payment is made out of the client share of any settlement or court award.
Only Certain Health Insurance Companies Can Place a Lien on a Personal Injury Settlement in New York
New York prohibits insurance companies from seeking reimbursement from personal injury settlements and awards unless the settlement or court award explicitly includes compensation for covered medical expenses. For example, in a slip and fall case, if we sue for pain and suffering and lost wages, but not medical expenses, then the health insurer is not entitled to reimbursement.
There are specific exemptions to the law. New York’s General Obligation Law (See, CPLR §4545[c]; General Obligations Law §5-335) allows reimbursement as long as two conditions are met:
- The insurance plan must be entitled to “statutory reimbursement” (e.g., Medicare) or the plan must be a fully self-funded plan that qualifies for ERISA; and
- The plan must have a reimbursement provision in its health plan
If both of these conditions are not met, then a health insurance company cannot collect reimbursement.
Medicare and Medicaid have a right to seek reimbursement. Federal law requires clients and their attorneys to notify Medicare if they receive a settlement or court award. Medicare has an intensive and lengthy process to collect their reimbursement. Medicaid does not have an automatic right to collect reimbursement. For Medicaid to collect, they must first contact you or your attorney to assert their right to reimbursement.
ERISA is a federal law (the Employee Retirement Income and Security Act). Health plans that are self-funded can qualify as ERISA plans and, if they do so, they are not subject to state law. If a health insurance plan is fully-self-insured and qualifies for ERISA, it can seek reimbursement from any court award or settlement even if you do not receive compensation for medical expenses.
Verifying that a Health Insurance Company Has the Right to Seek Reimbursement
It is important that you or your lawyer verify the right of a health insurance company to collect reimbursement. We receive claims and lien notices from many health insurance companies, but not all are entitled to reimbursement. You cannot tell simply by the name of the firm. For example, Oxford Health Insurance and Aetna Health Plans, two common insurers in the New York area, both offer insurance plans (which do not qualify) and self-insured plans (which do qualify for reimbursement). Sometimes, but not always, your health insurance ID card will indicate if your plan is self-funded.
If we receive a reimbursement claim or lien notice from an insurance company, we ask to see copies of the plan documents. The health plan must include statements about the following:
- Must state that it is a self-funded plan that is qualified for ERISA
- Must state that it is entitled to reimbursement for medical expenses when a covered person receives a settlement or court award
- Must state that it intends to pursue that reimbursement
We also ask to see the plan’s form 5500 which it must file with the IRS to show that it is a self-funded plan under ERISA.
Why is it important to see these documents? Here’s an example of how our verification process saved a client thousands of dollars. We had an out-of-state client injured in a slip and fall incident at a Manhattan hotel. Her insurance plan notified us that they intended to seek reimbursement and assured us that they were entitled to do so. When we requested to see the proper documentation, they admitted that they did not have a right to collect reimbursement.
What is a Self-Funded Health Plan?
In a traditional health insurance plan, a person or an employer pays an insurance company a monthly premium and the insurance company pays the medical claims out of the pool of premiums. In a self-funded plan, an employer pays the medical bills out of its own funds. Those funds can include contributions made by employees.
Self-funded plans often contract with traditional health insurance companies for administrative services. So the health insurance company may issue the ID cards, answer customer service calls and pay the claims, but the funding for the claims will come from the employer.
Union Benefit Funds are traditionally self-funded plans. Many large employers are self-funded. Small businesses are rarely self-funded and will rely on traditional insurance.
For What Expenses Can a Qualified Health Insurer Receive Reimbursement?
If a plan is qualified to receive reimbursement, it can only receive reimbursement related to the injuries involved in the personal injury case. For example, a person injured in an automobile crash might receive treatment for an injured back and shoulder while continuing treatment with a dermatologist for a skin condition. Assuming the skin condition is not related to the car accident, the health insurance company is not entitled to reimbursement for those services.
If the claim is valid, we will stay in touch with the health plan (or their agent) and monitor the expenses for which they intend to claim reimbursement. We include those expenses in any settlement demand or argument for compensation that we present to a jury. We use that information to increase the settlement or jury award that a client will receive.
Once we settle a case or finish a trial, we ask the health plan to provide documentation for all of the reimbursements they claim. We review that data with our clients. We check for the obvious mistakes (mathematical errors) and for any claims not related to the injury involved in the settlement or court award.
Reducing the Lien Amount When an Insurance Company Seeks Reimbursement
Even after verifying that a health insurer is entitled to reimbursement and that all the claims are valid, there may be ways to reduce the amount owed. Since there is a cost involved in obtaining the settlement or award, the health insurers will recognize their share of those costs. This reduction usually means that the health insurer will reduce the lien by a percentage equal to the legal fees (generally 33 percent).
If a client does not receive full value for a case, the health insurer will usually further reduce the lien to reflect this fact. Let’s say that a client suffers an injury with a value of $100,000 in a car accident, but the defendant only has a $25,000 insurance policy and there is no other money to pay towards the settlement. Since the plaintiff only receives 25 percent of the value of this case, we can often negotiate with the health insurer to reduce the lien to 25 percent of value.
Conclusion: There are Strict Limits to the Ability of a Health Insurance Company to Collect Reimbursement from a Personal Injury Settlement or Court Award
Yes, a health insurance company may seek reimbursement from your personal injury settlement, but you may not have to pay that reimbursement or all of that reimbursement. New York law prevents certain health insurers from seeking reimbursement. Even qualified health insurers can only seek reimbursement for claims directly related to your accident and even that amount may be negotiated lower.
We hope this information helps.
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