SUBROGATION AND LIENS INCLUDING MEDICARE SET ASIDE REPORTING

Transcription

1 SUBROGATION AND LIENS INCLUDING MEDICARE SET ASIDE REPORTING JUDY KOSTURA Judge, Kostura & Putman, P.C. The Commissioners House at Heritage Square 2901 Bee Cave Road, Building L Austin, Texas (512) telephone (512) facsimile jkostura@prismnet.com (evening ) State Bar of Texas ADVANCED PERSONAL INJURY COURSE 2011 Dallas July 6-8 San Antonio August Houston September Houston November 2-4 CHAPTER 34

2 TABLE OF CONTENTS I. OVERVIEW OF SUBROGATION, HISTORY, FEDERAL AND STATE BALANCING ACT, AND COMMON LAW EQUITABLE PRINCIPLES... 1 A. History of state and federal regulation of insurance... 1 B. Definitions... 2 C. Types of subrogation interests: conventional, legal, equitable, and other insurance or pro-rata clauses:... 3 D. Is there subrogation in the absence of a contract or statute? No, unless yes... 5 E. Equitable Principles Made Whole Doctrine: the plaintiff's right to first recovery... 5 F. The critique of the Fortis opinion:... 9 G. Possible Solutions not obliterated by Fortis: Make sure the written policy specifically disclaims the made whole doctrine Do not apply Fortis to subrogation principles that were not at issue in Fortis H. Options when the injured claimant is not being made whole by the third party recovery and the contract disclaims the made whole doctrine: Sue the third party tortfeasor Limit the damages sought in the third party suit Invite the plan to a contested hearing on the Allocation of the Damages obtained in the Recovery Walk away from the case I. Ideas for ERISA plans Get the Summary Plan Description: Tell the client to spend the money? [JK: this is not without risk!] Focus on conditions precedent: Allocate the money to family members or claimants who do not owe a subrogation interest: Focus on whether or not an identifiable fund exists out of which to repay the plan Determine whether or not a lien is required before an identifiable fund exists out of which to repay the plan J. If all else fails: Common Fund Doctrine: the plaintiff's right to reimbursement of a pro-rata share of the cost of obtaining the recovery Ethics Pointer Laches Can the carrier subrogate against itself? Construe all ambiguities against the plan Subrogation as a sword and shield Does bankruptcy by the debtor discharge a subrogation interest or lien? II. SUBROGATION INTERESTS GRANTED BY FEDERAL LAW (VA, MEDICARE, FEHBA) A. Veterans Administration The right of reimbursement Made Whole applies; also Common Fund and reduction or waiver For cases in litigation B. Medicare The right of reimbursement The amount of reimbursement Set-aside provisions: The procedure for determining reimbursement Finding the intermediaries and opening the file Asking for a waiver Penalties for failing to reimburse Protecting Recoveries in a Special Needs Trust Medicare Risk HMO's and Medicare Cost HMO's i

3 10. May providers bill the patient instead of submitting the bills to Medicare Recommended Reading C. Medical Care Recovery Act, 42 U.S.C.A (2002) D. Federal Employees Health Benefits Act E. Federal Employees Workers Compensation Act III. TEXAS STATUTORY SUBROGATION INTERESTS (NOT INCLUDING WORKER S COMPENSATION) A. Medicaid The right of reimbursement Balance billing strictly regulated Finding Medicaid to repay subrogation Preserving Medicaid eligibility Reduction for client Attorney's fees and expenses B. Texas Rehabilitation Commission C. Indigent Health Care Treatment Act D. Health Care to Prisoners E. Crime Victim's Compensation Fund F. Child Health Plan For Certain Low-Income Children (CHIPS) G. State Employees Health Benefits Act and ERS and exhaustion of remedies IV. TEXAS STATUTORY SUBROGATION INTEREST: WORKER S COMPENSATION A. The right of reimbursement The scope of recovery: from the third party claim Attorney fees for collecting the subrogation interest Attorney fee for collecting the attorney fee Attorney liability for failing to pay the w/c subrogation interest There is no made whole doctrine in worker s compensation: Allocating the third party recovery and the subrogation interest Three practice tips Statute of limitations Disclosure and consent Ethical Considerations Uninsured/Underinsured Motorist Coverage Substitute policies l2. When the third party settles the comp lien cheap Waiver of the worker s comp lien in contracts State of Texas self-funded worker s compensation plans Worker s compensation plans cannot subrogate to the Guaranty Association but Assoc can subrogate to Plaintiff recovery Admitting evidence of the worker s compensation lien into evidence in the third party claim: V. TEXAS STATUTORY LIENS (HOSPITAL LIENS AND CHILD SUPPORT LIENS) A. The Hospital Lien Statute Reasonable and Regular Rate: Emergency hospital care and emergency medical care: Admission within 72 hours: Constructive notice and the timing of notice The lien applies to a child s recovery Subrogation principles do not apply Unanswered question if recovery inadequate Lienholders do not get interest or attorneys fees on top of the lien amount Balance Billing: Crime Victims Compensation Fund: Statutory Remedies for improperly filed lien: Does bankruptcy by the debtor discharge the lien? ii

4 13. Turning a lien into lemonade: The Stowers Doctrine Hospital liens in other states B. The Child Support Lien Statute Notice of the child support lien: actual or constructive? The property of the current spouse is not subject to the child support lien Medical liens and attorneys fees and expenses take priority over the child support lien Letters of protection do not take priority over the child support lien The child support lien takes priority over an ERISA interest Lottery Winnings may be subject to child support liens VI: MUNICIPAL OR COUNTY EMPLOYEE SUBROGATION INTERESTS GRANTED BY TEXAS LAW A. Employees of Local Political Subdivisions B. Municipal Officers & Employees VII: ERISA EMPLOYEE WELFARE BENEFIT PLANS A. The effect of ERISA (overview of subrogation cases) B. Establishing the plan s status as an 'employee welfare benefit plan' There must be a plan There must be proper intent and handling The employer must be engaged in an industry or activity affecting interstate commerce C. Plans that are not ERISA plans D. Laws that are not preempted by ERISA E. The child support lien takes priority over an ERISA interest F. Retaliation is barred under ERISA G. The beneficiaries remedy for an ERISA plan s misrepresentation of its subrogation rights VIII. ERISA AND TEXAS COMMON LAW EQUITABLE CONCEPTS, INCLUDING MADE WHOLE AND COMMON FUND, IN AN INSURANCE FUNDED PLAN A. ERISA does not (automatically) kill off Texas made whole doctrine or common fund doctrine because ERISA s savings clause preserves state regulation Made whole doctrine and ERISA B. Do not waive any common law made whole doctrine Common fund doctrine and ERISA IX. THE DOCUMENTS CONTROL; GET THE SUMMARY PLAN DESCRIPTION AND THE EMPLOYEE WELFARE BENEFIT PLAN A. ERISA and the Summary Plan Description Statutory Requirement for the plan and providing copies on request The Summary Plan Description controls; compare it to the underlying policy What constitutes a Summary Plan Description Read the Employee Welfare Benefit Plan s subrogation provisions X. ERISA AND SELF FUNDED EMPLOYEE WELFARE BENEFIT PLANS A. The statutory authority B. Stop Loss Coverage C. The seminal self funded case: FMC v. Holliday D. The 5 th Circuit and Supreme Court: what part of "all" do you not understand? Allowing the plan to sue its own insured for reimbursement E. Worse news from the 4 th Circuit: Failing to sign subrogation reimbursement forms terminates coverage 114 F. The Effect of Knudson and Sereboff: The Plan may seek equitable relief, including imposing a constructive trust on identifiable funds G. Overview of Cases Determining Appropriate Equitable Relief and the Plan s Remedies (1) Liability of the plan member: (2) Liability of the plan member s attorney: H. The plan must plead and prove its ERISA status I. Four practice tips iii

5 XI. ERISA S PREEMPTION (OR NOT) OF FEDERAL OR STATE LAW CAUSES OF ACTION A. State law causes of action and ERISA preemption B. Federal law causes of action and preemption C. The Common Fund doctrine and ERISA preemption D. Possible Solutions not obliterated by Fortis E. Preemption of state court jurisdiction, or not F. Additional research sources XII. USING THE DECLARATORY JUDGMENT ACT TO CONSTRUE AN AMBIGUOUS OR SILENT PLAN DOCUMENT OR TO DETERMINE ENTITLEMENT TO RECOVERY A. Federal actions authorized by ERISA B. Action in State Court XIII. NON-ERISA PLANS SUCH AS HMO'S, CHURCH-SPONSORED OR GOVERNMENT PLANS, AND INDIVIDUALLY PURCHASED HEALTH INSURANCE CONTRACTS A. Non-ERISA Plans B. HMO s C. Private Health Insurance D. Government or Church Employer Sponsored Plans XIV. AUTOMOBILE POLICIES, INCLUDING PIP, MEDICAL PAYMENTS, UM/UIM, AND PROPERTY DAMAGE A. Preserving the plaintiff's PIP B. Medical Payments Coverage on Auto Insurance The Common Fund Doctrine The Made Whole Doctrine C. Uninsured/Underinsured Motorist Coverage Statutory Authority D. Vehicle Property Damage XV. COORDINATION OF BENEFITS AS A MEANS OF AVOIDING PAYMENT BY HEALTH INSURERS. 137 XVI. ASSIGNMENTS TO CREDITORS, LETTERS OF PROTECTION AND AGREEMENTS TO REPAY SUBROGATION INTERESTS A. Assignments to Creditors B Letters of Protection C. Agreements to Repay Subrogation Interests Ethical Issues When the Client Reneges or the Recovery is Inadequate Ethical Issues When the Plan is Self-Funded Does a Reimbursement Agreement confer more benefits to the Plan than a Subrogation Agreement? Do Not Sign a Reimbursement Agreement which is broader than the Plan or Summary Plan Description provisions XVII.STATUTORY VIOLATIONS BY HEALTHCARE PROVIDERS AND STATUTORY VIOLATIONS BY SUBROGATION COLLECTION AGENCIES A. Chapter 146, Civil Practice & Remedies Code and Balance Billing B. Violations by Insurer of Federal Fair Debt Collection Practices Act C. Violations of the Texas Deceptive Trade Practices-Consumer Protection Act State Law Damages Available to Injured Consumers Extra-Contractual Damages May Not be Allowed in Plans Subject to ERISA XVIII. ADVICE TO ATTORNEYS A. Communicating with Client At the first interview At the time of settlement If a lawsuit against the subrogee is necessary iv

6 B. Communicating with Third Party Liability Carrier At the time the file is opened At the time of settlement C. Communicating with Subrogated Insurer or Self-Funded Health Plan At the time the file is opened During the course of the claim At the time of settlement D. Converting the Money... bad idea Penalties for conversion Protect yourself if the client does not want to repay Statute of limitations E. Health insurers who refuse to pay bills rather than pay and subrogate XIX. INDEMNIFICATION AND RELEASE DOCUMENTS XX MEDICARE APPENDIX v