Double Damages For Medicare Advantage Plans? – 11th Circuit To Decide

In Humana Medical Plan, Inc. v. Western Heritage Insurance Co., No. 12-20123, 2015 U.S. Dist. LEXIS 31875, the U.S. District Court for the Southern District of Florida granted Humana’s Motion for Summary Judgment and held that Humana’s right to reimbursement for the conditional payments it made on behalf of plan beneficiary under a Medicare Advantage Plan was enforceable and Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A). The 11^th Circuit will now have the opportunity to decide if this break from precedent is appropriate.

Under the MSP Act’s private cause of action, the Southern District of Florida found that Humana has a right to recover from Western Heritage the benefits it paid and is statutorily entitled to recover double damages. The Court concluded that after Western Heritage became aware of payments by the Humana Medicare Advantage Plan, it had an obligation to independently reimburse Humana. The Court ruled that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and was therefore, entitled to $38,310.82 in damages.

Western Heritage’s position is that the district court’s holding departed from the plain language of the Social Security Act giving a privately run Medicare Advantage Organizations (“MAOs”) a new cause of action for double damages against primary plans. This holding is contrary to the decisions of several circuit courts and ignores the law’s carefully crafted scheme that permits MAOs to assert (state court) subrogation claims or otherwise bill providers or insurers for health care claims for which MAOs are “secondary,” but does not permit federal court claims, much less for double damages.

Western Heritage arguesthat there is a distinction between Medicare, which has a cause of action for double damages against parties who fail to reimburse conditional payments, and MAOs, who have no such cause of action. This distinction is clearly reflected in the MAO statute, the Medicare Secondary Payer (MSP) Act, the SMART Act amendments to the MSP Act, and the implementing regulations promulgated by the Centers for Medicare and Medicaid Services (“CMS”).

The gist of this position is contained in the following four arguments.

First, the secondary payor provisions that are specifically applicable to MAOs do not contain any direct cause of action by MAOs against primary payors, let alone an action for double damages. (See, 42 U.S. § 1395w-22(a)(4)). Had Congress intended to grant MAOs a right of action against primary payors, such right would have been included here. However, the right simply does not exist in the MAO statute.

Second, the provision of the MSP Act that does provide for a private right of action, on which the district court relies, makes no mention at all of MAOs. (Id. 1395y(b)(3)(A)). Again, had Congress intended MAOs to have the right to sue, it could easily have included MAOs expressly in this provision, but did not.

Third, it is also clear based on the mechanics of the overall MSP statutory and regulatory scheme that neither Congress nor CMS, in its implementation of the MSP Act, intended to grant MAOs a private right of action. Had Congress and CMS intended to bestow such a benefit on MAOs, either would have imposed upon MAOs the same disclosure obligations already imposed on CMS, without which, the MSP payment system does not work. More specifically, CMS administers a program that permits settling parties to ascertain any potential reimbursement obligation following a settlement, judgment, award or other payment in which Medicare beneficiaries are involved. However, no such program exists for MAOs.

Fourth, under the newly enacted SMART Act amendments to the MSP Act, CMS is required to provide claims and repayment information to primary payors during settlement discussions so that they can account for Medicare reimbursement in their settlements with beneficiaries. In other words, the statute and regulations provide a mechanism to mitigate the possibility that a primary plan will be sued by Medicare for double damages as a result of entering into a settlement with a Medicare beneficiary. However, neither Congress (in the statute) nor CMS (in regulation or guidance), imposed similar requirements on MAOs, or comparable protections for primary payors considering settling beneficiaries’ claims, clearly signaling that they did not intend a right of action in favor of MAOs. With rights come obligations — given that Medicare has the right to sue primary payors for conditional payments, so Medicare has the obligation to inform primary payors of the claims and repayment information at and following settlement. That MAOs have no such obligation further bolsters the conclusion that they have no right to anything more than a subrogation claim.

The district court’s decision permitting a cause of action by MAOs against primary payors, in addition to being incorrect as a matter of law, creates a severe impediment to settlement. As the present case illustrates, primary plans are unable to ascertain whether the party with whom they are negotiating is an MAO plan member and to what extent payment was made to the plan member by the secondary payor, a private MAO. As a result, if the underlying decision stands, primary plans will need to think twice before settling claims and thereby risking a double damages cause of action; even if, like Western Heritage here, they acted in the utmost good faith to learn of any reimbursement obligation. This impediment to settlement runs counter to the longstanding objectives of judicial economy and stands to harm Medicare beneficiaries, primary payors and the Medicare Advantage (“MAO”) plans, whose cases will now be more likely to proceed through trial.

Humana vs. Western Heritage – Double Damages for Medicare Advantage Plans

In Humana Medical Plan, Inc. v. Western Heritage Insurance Co., No. 12-20123, 2015 U.S. Dist. LEXIS 31875, the U.S. District Court for the Southern District of Florida granted Humana’s Motion for Summary Judgment and held that Humana’s right to reimbursement for the conditional payments it made on behalf of plan beneficiary under a Medicare Advantage Plan was enforceable. Consequently, Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

In resolving the underlying personal injury action that gave rise to this case, the plaintiff confirmed there were no outstanding Medicare liens against the settlement proceeds. As evidence the plaintiff presented a letter from The Center for Medicare and Medicaid Services (”CMS”) dated December 3, 2009 which confirmed CMS had no record of processing Medicare claims on behalf of the plaintiff.

Eventually Western Heritage, the third party carrier, learned of Human’s Medicare Advantage lien and attempted to include Humana as a payee on the settlement draft. The state court judge ordered full payment to the plaintiff without including any lien holder on the settlement check. The judge simultaneously ordered plaintiff’s counsel to hold sufficient funds in a trust account to be used to resolve all medical liens.

While Humana and the plaintiff remained in ongoing litigation, Humana filed this action against Western Heritage seeking double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

The Medicare Secondary Payer Act (MSP) provides for a private cause of action when a primary plan fails to reimburse a secondary plan for conditional payments it has made.

“there is established a private cause of action for damages (which shall be 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) in accordance with paragraphs (1) and (2)(A).”

42 U.S.C. § 1395y(b)(3)(A).

42 C.F.R. §422.108(f) extends the private cause of action to Medicare Advantage Plans (Medicare Advantage Organizations “MAO”s).

“MAOs will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.”

Additionally, CMS directors have issued memorandum asserting that:

“notwithstanding recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of Medicare Part C and D programs.”

CMS, HHS Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011).

While the Eleventh Circuit has not yet addressed the issue of whether a Medicare Advantage Organization, such as Humana, may bring a private cause of action against a primary plan under the secondary provision of the Act, the Third Circuit has addressed the issue and held that it can. In Avandia II the Third Circuit reasoned that the Medicare statute should be read broadly and that the language of the Medicare Advantage Organization statute (42 U.S.C. §1395w-22(a)(4)) cross references the Medicare Secondary Payer Act’s (“MSP”) language (42 U.S.C. § 1395y(b)(2)(A)) which allows these plans to utilize the enforcement provision of the MSP (42 U.S.C. 1395y(b)(3)(A)). The Third Circuit added to their opinion that the MAO plans are able to use the MSP. To deny them this ability, would put them at a competitive disadvantage, and moreover that the federal agency had enacted reasonable regulations in 42 C.F.R. § 422.108. This regulation is relied on by the MAO plans in their recovery actions as it states that the MAO plans have the same recovery rights as traditional Parts A & B

Unlike the Third Circuit the Ninth Circuit in Parra v. Pacificare of Arizona, 2013 U.S. App. LEXIS 7861 was not persuaded that the cross referencing of the MAO Statute (42 U.S.C. §1395w-22(a)(4) ) and the MSP (42 U.S.C. §1395y(b)(2)) created a federal cause of action. The Ninth reasoned that this cross-reference simply explains when MAO coverage is secondary to a primary plan, but does not create a federal cause of action in favor of a MAO. Here the Court found that “[l]anguage in a regulation may invoke private right of action that Congress through statutory text created, but it may not create a right that Congress has not”. They elaborated by stating in clear terms that, “It is relevant laws passed by Congress, and not rules or regulations passed by an administrative agency, that determine whether an implied cause of action exists”.

Western Heritage argues that this Court should follow Parra and “interpret the Medicare Act as not providing a private right of action in favor of MAOs such as Humana.” However, as predicted in my last post on this topic the holding in Parra is too narrow to be of any assistance and the Court here finds the facts of Parra distinguishable. The Court found the Third’s Circuit’s analysis regarding the ability of an MAO to bring a private cause of action under the MSP Act to be persuasive.

Pursuant to the MSP Act’s private cause of action, the Court found that Humana has a right to recover from Western Heritage the benefits it paid and is statutorily entitled to recover double damages. Additionally, “if Medicare is not reimbursed as required by paragraph (h), the primary payer must reimburse Medicare even though it has already reimbursed the beneficiary or other party.” 42 C.F.R. § 411.24(i)(1). Therefore, the Court concludes that after Western Heritage became aware of payments by the Humana Medicare Advantage Plan it had an obligation to independently reimburse Humana. Because it didn’t, the Court rules that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and is therefore entitled to $38,310.82 in damages.

The trial attorney should now expect the same treatment of Medicare Advantage claims by defense counsel as is now the case with Medicare A & B. Defense counsel will likely demand written confirmation that any purported Medicare Advantage has been satisfied, and may be reluctant to disburse funds to the plaintiff based solely on the expectation that the plaintiff will satisfy this obligation. As a matter of practice it may be more expedient to have defense issue separate settlement drafts to the plaintiff and the MAO rather than a single check with two (2) payees.

Medicare Gives Refunds? How Can My Client Get One?

Repaying Medicare for conditional payments is a necessary but unpleasant process which can result in a greatly reduced net recovery or no recovery at all for an injured Medicare beneficiary. The Medicare Secondary Payer Statute has a repayment formula that is designed to maximize the return of funds to Medicare and provides no consideration for the future well-being of the Medicare beneficiary. The only consideration that Medicare makes in applying its repayment formula is whether or not the amount of the Medicare Conditional Payments is less than, equal to or greater than the gross settlement. (42 C.F.R. 411.37(c); 42 C.F.R. 411.37(d)). Despite Medicare’s blind application of the repayment regulations, there is a way for the injured Medicare beneficiary to increase his/her net recovery. This is by way of obtaining a refund from Medicare which sounds crazy, but it works.

In the worst case scenario where the amount of Medicare Conditional Payments is equal to or exceeds the gross settlement, the injured Medicare beneficiary experiences the harshest treatment. In that circumstance, the Medicare beneficiary must return all of their net settlement (after attorney fees and costs) to Medicare, resulting in a zero net recovery to the plaintiff. The regulations provide:

“If Medicare payments equal or exceed the judgment or settlement amount, the recovery amount is the total judgment or settlement payment minus the total procurement costs.”

(42 C.F.R. 411.37(d))

This is a situation that is happening with increased frequency as the cost of medical treatment rises and a contracting economy forces many parties to carry only the mandatory minimum limits of insurance coverage. The practical effect of this regulation is seen daily by the attorneys who represent injury victims as they wrestle with the equitable and ethical issues of resolving a policy limits case wherein only the attorneys/Medicare will see any portion of the settlement funds. It may even be the case that the only settlement funds come from the Medicare beneficiary’s own Uninsured Motorist coverage. In that case, the injured plaintiff has been paying premiums for insurance coverage just so Medicare and their attorney can be paid in the event they suffer massive injuries. (See 42 C.F.R. 411.50(b) authorizing repayment to Medicare from UIM proceeds).

In an attempt to reduce the unforgiving nature of the repayment formula, many attorneys have looked for ways to ensure their clients see at least a nominal amount of the personal injury settlement. These client centric attorneys often want to reduce or waive their fees and costs once they have received the “Final Demand” from the MSPRC. Despite the good intentions of these attorneys, if they reduce or eliminate their fees without updating the settlement information provided to MSPRC they are committing Medicare fraud. According to the regulations:

“Recovery against the party that received payment—

(1) General rule. Medicare reduces its recovery to take account of the cost of procuring the judgment or settlement, as provided in this section, if—

(i) Procurement costs are incurred because the claim is disputed; and

(ii) Those costs are borne by the party against which CMS seeks to recover.”

(42 C.F.R. 411.37(a))

If the costs (including attorney fees) are not borne by Medicare beneficiary then under the above regulation Medicare would not have applied the reduction formula to their demand for repayment. Yet informing Medicare that the attorney has waived fees or costs will only result in Medicare increasing its repayment demand in the same amount, still leaving the injured plaintiff with nothing. This leaves the only option of “gifting” all or a portion of the attorney fees back to the client, which involves its own set of tax consequences and potential ethical quandaries.

As an answer to this problem, Synergy has developed a low-cost way for Medicare beneficiaries to take advantage of seldom used statutes/regulations to obtain a refund of all or part of the funds which were paid to MSPRC in satisfaction of Medicare’s “Final Demand.” There are three statutory provisions under which Medicare may accept less than the full amount of its Conditional Payment:

1. §1870(c) of the Social Security Act;

2. §1862(b) of the Social Security Act; and

3. The Federal Claims Collection Act (FCCA).

Each statute contains different criteria upon which decisions to waive or compromise Medicare’s claim are considered. Additionally, the authority to grant a waiver or compromise under each of these statutes is limited to specific entities. Medicare contractors have authority to consider beneficiary requests for waivers under §1870(c) of the Act. Whereas, authority to waive Medicare claims under §1862(b) and to compromise claims under FCCA, is reserved exclusively to the Center for Medicare and Medicaid Services (“CMS”).

MSPRC has the authority to grant full or partial waivers to beneficiaries for whom repayment of Medicare’s Conditional Payments would pose a financial hardship. According to the regulations:

“There shall be no recovery if such recovery would defeat the purposes of this chapter or would be against equity and good conscience.”

(See, 42 U.S.C. § 1395gg (c), §1870(c) of the Social Security Act; 42 C.F.R. 405.355-356; 42 C.F.R. 405.358; 20 C.F.R. 404.506-512; Medicare Secondary Payer Manual (MSP), Chapter 7 § 50.5.4.4).

In order to apply for this “Financial Hardship” waiver, the Medicare beneficiary must file form SSA-632-BK with MSPRC which documents their financial situation. Synergy also includes in this request a letter drafted by the Medicare beneficiary (not their attorney) explaining the undue hardship that repaying Medicare would cause. These decisions by MSPRC are made on a case by case basis. The MSPRC’s manual explains their approach well and provides indicators of whether or not a waiver should be granted.

In addition to a request made to MSPRC for a “Financial Hardship” waiver under §1870(c) of the Social Security Act, Synergy requests a “Best Interest of the Program” waiver direct from CMS under §1870(b) of the Social Security Act. Requests for a waiver under this statute are often overlooked by even the most seasoned attorneys and lien resolution companies. Synergy however understands that the settlement proceeds for which the Medicare beneficiary is fighting to retain is the only source of a recovery for the injuries sustained and must provide for their future needs. Therefore, Synergy vigorously pursues every avenue that can be used to obtain a refund from Medicare. CMS has authority to waive in full or in part Medicare’s claim for repayment when it is “in the best interest of the program.” This rather vague criteria is nowhere further defined and lies completely at the discretion of CMS.

It is important to note that an evaluation by CMS of a “Best Interest of the Program” waiver is a separate and distinct evaluation than a request for a Compromise under the Federal Claims Collection Act (FCCA). As the stakes are high for the Medicare beneficiary, Synergy always makes both a request for this waiver and a request for a compromise when seeking a refund from CMS of the amounts the beneficiary has already paid to satisfy the “Final Demand.”

The third and final method for obtaining a refund from Medicare is a Compromise request made to CMS. Authority to grant a Compromise is granted to CMS under the Federal Claims Collection Act (FCCA). (31 U.S.C. 3711).

The Medicare Secondary Payer Manual compiles the statutory and regulatory sources, articulating the criteria in a straight forward manner as follows:

“[31 U.S.C.3711] gives Federal agencies the authority to compromise where:

The cost of collection does not justify the enforced collection of the full amount of the claim;
There is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or
The chances of successful litigation are questionable, making it advisable to seek a compromise settlement.”

(Medicare Secondary Payer Manual (MSP), Chapter 7 § 50.7.2)

As one can see, there are many things for CMS to evaluate on a case by case basis to determine if the proposed Compromise should be accepted or not. Synergy has developed detailed processes to insure that each relevant factor is brought to the attention of CMS so that the Medicare beneficiary has the best possible chance for obtaining an acceptance of the offered Compromise.

Obtaining a refund from Medicare of all or part of the funds paid to satisfy the “Final Demand” is not an easy task. It requires intimate knowledge of a variety of statutes, regulations, and the Medicare Secondary Payer Manual. However, it may be the only method by which a severely injured Medicare beneficiary will be able to obtain any portion of their personal injury settlement funds. Synergy has the knowledge and experience to employ all available tactics to obtain a refund for our customers. We also have a successful track record in obtaining substantial refunds for Medicare beneficiaries. We understand the importance of preserving settlement funds for the injured plaintiff and share the client centric mentality of the plaintiff’s bar. To that end, Synergy provides a Medicare Lien Resolution Service at a very low up front cost by taking our fee in proportion to how successful we are in obtaining a refund for the Medicare beneficiary (% of savings).

To see the kind of results Synergy achieves for its clients in terms of lien reduction, click HERE

Special Needs Trusts – The Differences

Special Needs Trusts – The Differences

By: Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

A special needs trust is a trust that can be created pursuant to Federal law whose corpus or any assets held in the trust do not count as resources for purposes of qualifying for Medicaid or SSI. Thus a personal injury recovery can be placed into a SNT so that the victim can continue to qualify for SSI and Medicaid. Federal law authorizes and regulates the creation of a SNT. The 1396p[i] provisions in the United States Code govern the creation and requirements for such trusts. First and foremost, a client must be disabled in order to create a SNT.[ii] There are three primary types of trusts that may be created to hold a personal injury recovery and one type used when it isn’t the injury victim’s own assets, each with its own unique requirements and restrictions. First is the (d)(4)(A)[iii] special needs trust which can be established only for those who are disabled and are under age 65. This trust is established with the personal injury victim’s recovery and is established for the victim’s own benefit. Second is a (d)(4)(C)[iv] trust typically called a pooled trust that may be established with the disabled victim’s funds without regard to age. The third is a trust that can be utilized if an elderly client has too much income from Social Security or a pension to qualify for some Medicaid based nursing home assistance programs. This trust is authorized by the federal law under (d)(4)(B)[v] and is commonly referred to as a Miller Trust. Lastly, there is a third party[vi] SNT which is funded and established by someone other than the personal injury victim (i.e., parent, grandparent, donations, etc. . .) for the benefit of the personal injury victim. The victim still must meet the definition of disability but there is no required payback of Medicaid at death as there is with a (d)(4)(A) or (d)(4)(C).

Since the pooled (d)(4)(C) trust and the (d)(4)(A) SNT are most commonly used with personal injury recoveries, I will focus on comparing these two types of trust. There are several significant differences between a (d)(4)(C) pooled trust and a (d)(4)(A) special needs trust. I will discuss these differences first starting with the (d)(4)(C) pooled trust. As a starting point, a disabled injury victim joins an already established pooled trust as there is no individually crafted trust document. There are four major requirements under Federal law necessary to establish a pooled trust. First, the trust must be established and managed by a Non-Profit.[vii] Second, the trust must maintain separate accounts for each Beneficiary, but the funds are pooled for purposes of investment and management.[viii] Third, each trust account must be established solely for the benefit of an individual who is disabled as defined by law, and it may only be established by that individual, the individual’s parent, grandparent, legal guardian, or a Court.[ix] Fourth, any funds that remain in a Beneficiary’s account at that Beneficiary’s death must be retained by the Trust or used to reimburse the State Medicaid agency.[x]

As for the differences from a (d)(4)(A) special needs trust, there are four primary differences. First, a (d)(4)(A) special needs trust can only be created for those under age 65. However, a (d)(4)(C) pooled special needs trust has no such age restriction and can be created for someone of any age. Second, a Pooled Special Needs trust is not an individually crafted trust like a (d)(4)(A) special needs trust. Instead, a disabled individual joins a Pooled Trust and a professional non-profit trustee pools the assets together for purposes of investment but each beneficiary of the trust has his or her own sub-account. Third, a pooled trust is managed by a not for profit entity who acts as trustee overseeing distributions of the money. The non-profit trustee may manage the money themselves or hire a separate money manager to oversee investment of the trust assets. Fourth, at death the non-profit trustee may retain whatever assets are left in the trust instead of repaying Medicaid for services they have provided as is the case with a (d)(4)(A) special needs trust.[xi] By joining a pooled trust, a disabled aged injury victim can make a charitable donation to the non-profit who manages the pooled trust and avoid the repayment requirement found within the Federal law for (d)(4)(A) special needs trusts. Other than the aforementioned differences, it operates as any other special needs trust does with the same restrictions on the use of the trust assets.

With a (d)(4)(A) special needs trust, a trustee needs to be selected unlike the pooled trust where it is automatically a non-profit entity. This provides some flexibility to the family or loved ones to have a hand in the selection of the trust company or bank acting as trustee. However, it is important to have a trustee experienced in dealing with needs based government benefit eligibility requirements so that improper distributions are not made. Many banks and trust companies don’t want to administer special needs trusts under $1,000,000.00 in trust assets which can make it difficult to find the right trustee. Most pooled special needs trusts will accept any size trust and the non-profit is experienced in dealing with those that are receiving disability based public benefits. With the (d)(4)(A), there are no startup costs except the legal fee to draft the trust which can vary greatly. The (d)(4)(C) pooled trusts typically have a one-time fee at inception which can range from $500 to $2,000 which is typically much cheaper than the cost of establishing a (d)(4)(A) special needs trust. Most trustees (pooled or (d)(4)(A)) will charge an ongoing annual fee which is typically a percentage of the trust assets. These fees vary between 1-3% depending on how much money is in the trust. A (d)(4)(A) will offer many investment choices for the funds held in the trust while a (d)(4)(C) will have only one investment strategy.

The major limitation of all types of special needs trusts is that the assets held in trust can only be used for the sole benefit of the trust beneficiary. So in the case of a disabled injury victim that funds a pooled special needs trust with their personal injury recovery, those funds can only be used for their benefit. The disabled injury victim could not withdraw money and gift it to a charity or family. The purpose of the special needs trust is to retain Medicaid eligibility, and use trust funds to meet the supplemental, or “special” needs of the beneficiary. These can be quite broad, however, and include things that improve health or comfort, non-Medicaid covered medical and dental expenses, trained medical assistance staff (24 hours or as needed), independent medical check-ups, medical equipment, supplies, programs of cognitive and visual training, respiratory care and rehabilitation (physical, occupational, speech, visual and cognitive), eye glasses, transportation (including vehicle purchase), vehicle maintenance, insurance, essential dietary needs, and private nurses or other qualified caretakers. Also included are non-medical items, such as electronic equipment, vacations, movies, trips, travel to visit relatives or friends and other monetary requirements to enhance the client’s self-esteem, comfort or situation. The trust may generally pay for expenses that are not “food and shelter” which are part of the SSI disability benefit payment. However, even these items could be paid for with trust assets but SSI payments could be reduced or eliminated. This may not be problematic if the disabled injury victim qualifies for Medicaid without SSI eligibility. However, many states grant automatic Medicaid eligibility with SSI so one has to be careful about eliminating the SSI benefit.

Why Consider Using a Pooled Trust Regardless of the Size of the Settlement?

Pooled Trusts are useful in smaller settlements because of the relatively low costs of joining a pooled trust. As discussed above, they are also preferable in many settlements to a (d)(4)(A) SNT because a (d)(4)(C) pooled trust can be established by the injury victim and does not require a parent, grandparent, legal guardian or court order like a (d)(4)(A) SNT. Even though the pooled trust accepts relatively small settlements, the trust beneficiary gets the benefit of having a professional trustee manage their trust. With a (d)(4)(A) it is very difficult to find a professional trustee to manage a small trust. The pooled trust under (d)(4)(C) avoids that problem. There are no minimum trust deposits required for a pooled trust so it can be used for settlements as small as a few thousand dollars. It may not make sense to establish a pooled trust with too small of a settlement, but it is a viable option.

Benefits of Using the Settlement Solutions National Pooled Trust

The Settlement Solutions National Pooled Trust (SSNPT for short) is the only national pooled trust created exclusively for personal injury victims. The trustee, Foundation for Those With Special Needs, Inc. is a non-profit formed exclusively to protect those with special needs. Through retained funds, the Foundation is able to support other charitable organizations that protect and promote the civil justice system. SSNPT has the lowest fees of any national pooled trust. In addition and most importantly, SSNPT has a very generous retained funds policy. If the client elects to have the funds distributed at his or her death instead of them being retained by the non-profit, the trustee will distribute the remaining funds after Medicaid is paid back and only retains 10% or $10,000 whichever is less. Many pooled trusts retain 100% of the remaining assets at death and don’t allow distribution at all. Other will retain a large amount with many retaining as much as $25,000.00.

SSNPT has a wide array of investment options that can be utilized by the trust beneficiary. Most pooled trusts manage all of the assets a single way and don’t provide any options in regards to managing the assets held in trust. This makes the SSNPT a great alternative for cases of any size where the client needs to keep Medicaid/SSI eligibility and customized management is desired. SSNPT even has a sub-trust for those that are “dual” eligible for Medicaid and Medicare. In those cases, where an MSA is done, it needs to be wrapped in a special needs trust wrapper to keep it from being an available resource. SSNPT has a low cost solution for these types of clients.

For more information on the SSNPT, visit www.ssnpt.com

[i] 42 U.S.C. § 1396p.

[ii] To be considered disabled for purposes of creating an SNT, the SNT beneficiary must meet the definition of disability for SSDI found at 42 U.S.C. § 1382c. 42 U.S.C. § 1382(c)(a)(3) states that “[A]n individual shall be considered to be disabled for purposes of this title … if he is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or … last for a continuous period of not less than twelve months (or in the case of a child under the age of 18, if that individual has a medically determinable physical or mental impairment, which results in marked and severe functional limitations, and which can be expected to result in death or … last for a continuous period of not less than 12 months).”

[iii] 42 U.S.C. § 1396p (d)(4)(A) provides that a trust’s assets are not countable if it is “[a] trust containing the assets of an individual under age 65 who is disabled (as defined in section 1382c (a)(3) of this title) and which is established for the benefit of such individual by a parent, grandparent, legal guardian of the individual, or a court if the State will receive all amounts remaining in the trust upon the death of such individual up to an amount equal to the total medical assistance paid on behalf of the individual under a State plan under this subchapter.”

[iv]42 U.S.C. § 1396p (d)(4)(C) provides that a trust’s assets are not countable if it is “[a] trust containing the assets of an individual who is disabled (as defined in section 1382c (a)(3) of this title) that meets the following conditions: (i) The trust is established and managed by a non-profit association. (ii) A separate account is maintained for each beneficiary of the trust, but, for purposes of investment and management of funds, the trust pools these accounts. (iii) Accounts in the trust are established solely for the benefit of individuals who are disabled (as defined in section 1382c (a)(3) of this title) by the parent, grandparent, or legal guardian of such individuals, by such individuals, or by a court. (iv) To the extent that amounts remaining in the beneficiary’s account upon the death of the beneficiary are not retained by the trust, the trust pays to the State from such remaining amounts in the account an amount equal to the total amount of medical assistance paid on behalf of the beneficiary under the State plan under this subchapter.”

[v] 42 U.S.C. § 1396p (d)(4)(B).

[vi] Third party special needs trusts are creatures of the common law. Federal law does not provide requirements or regulations for these trusts.

[vii] 42 U.S.C. § 1396p (d)(4)(C).

[viii] Id.

[ix] Id.

[x] Id.

[xi] If the funds remaining in the trust at death are sufficient to repay Medicaid’s payback right in full, many pooled trusts will distribute some portion of the remaining monies to the trust beneficiary’s heirs. However, each pooled trust will have a different policy and the amount retained at death can vary greatly. It is very important to investigate how much is retained in this type of situation. Some trusts will only retain $5,000 while others may retain $50,000.

Are you Cutting A Check to the IRS this Year?

Are you Cutting A Check to the IRS this Year?

By Daniel J. Alvarez, J.D. and Anthony F. Prieto, Jr., CFP®

As the tax season draws to a close, you may be reviewing your tax return with some displeasure. Did you cut too large of a check to the Department of Treasury for your 2014 tax bill? If so, there are several options for you to consider to lessen the tax burden for 2015.

Due to the contingent nature of compensation as a plaintiff lawyer, unique pre-tax and tax deferred retirement planning options are available. Herein we will compare and contrast traditional small business retirement plans with some of the unique tax deferred options available when you earn a contingent fee.

The following are common advantages to deferral in general:

Creating an automatic investment program to help augment your retirement
The possibility of paying less tax on the withdrawal than the current tax rate
Potentially manipulating tax brackets during the deferral years and the withdrawals years
Earning interest on money that would have gone directly to your immediate tax burden
Being able to invest 100% of the money pre-tax instead of after tax

Given these obvious advantages, which of the following is the best fit for your practice? The information below may be helpful in determining which plan or combination of plans makes the most fiscal sense.

Traditional Small Business Retirement Plans

A few examples of those that would fall under the traditional options include 401(k)s, Defined Benefit Plans, Profit Sharing, SEP IRAs and Simple IRAs are a few that would fall under the traditional options. These plans allow employees/owners to contribute funds on a pre-tax basis into the plan. The plan typically has a myriad of investment options to consider. All taxes are deferred until the funds are withdrawn.

Pros:

Easy to install
Each employee/owner makes independent deferral and investment decisions

Cons:

The plans typically have low deferral limits ($25k or less)
Most small business plans require the employer match employee contributions
These plans are typically subject to withdrawal penalties before age 59.5 and RMD withdrawals beginning at age 70.5

Attorney Fee Structured Settlement Plans

Attorneys are allowed to defer their fees by utilizing structured settlement annuities similar to those that are used for planning purposes with personal injury clients. The fee structure is not tax free, but is instead tax deferred. One hundred percent of the fee can be put into the fee structure or just a portion of the fees. It is done on a pre-tax basis so that taxes are not recognized until the year in which future periodic payments from the fee structure are received. For example, an attorney can earn a $250,000 fee in 2014 but set up a payment plan that pays him from 2020 to 2030. There would be no taxable income in 2014, the entire $250,000 fee would go into the fee structure annuity and the tax burden would be spread out from 2020 to 2030.

Pros:

Easy to use
No investment risk
Unlimited deferral amount
No early withdrawal tax penalties
Ability to create a lifetime income

Cons:

Plan cannot be modified after the release is signed (No acceleration or deceleration of payments)
Fixed investment option only
Coordination with Client and Defendant required

Alternative Fee Deferral Programs

Several new alternatives have popped up in the marketplace over the last few years that rely on the same premise and case law as the Attorney Fee Structured Settlements. The two that are most commonplace are the use of offshore assignment companies and deferred compensation programs.

Offshore Assignment Companies (non-insurance partners) allow the attorney to defer the fee into the Assignment Company that then invests the proceeds through a variety of investment options.

Pros

Variety of investment options
Unlimited deferral amounts
No early withdrawal tax penalties

Cons

Plan cannot be changed after the release is signed (No acceleration or deceleration of payments)
Complex investment program involving offshore assignments
Coordination with Client and Defendant required

The Deferred Compensation program is done through the use of a Rabbi Trust. This option does not involve an offshore assignment and has flexible withdrawal options.

Pros

Variety of investment options
Unlimited deferral amounts
No early withdrawal tax penalties
Withdrawal rights can continue to be deferred
Simple language Incorporated in Client Agreement (not release)

Cons

Complex investment program for highly qualified investors
Ongoing investment management and withdrawal decisions

As this article points out, there are pros and cons to each alternative. Each attorney should seek out a qualified planner and tax professional to help them navigate the options. In all probability, the best option is a combination of the programs. A fixed income component, such as a fee structure annuity, is a wise piece of any diverse investment portfolio. Plaintiff attorneys should carefully consider whether adding fixed income pre-tax makes the most sense for their financial goals. In addition, other alternative deferred compensation programs should be explored as well.

Please contact Synergy today at (877) 242-0022 or info@synergysettlements.com for more information on utilizing these unique planning opportunities exclusively available for contingent legal fees.

How Quickly it Can Be Gone: Don’t Blow a Personal Injury Recovery

By: Jason D. Lazarus, J.D., LL.M., MSCC, CSSC

In a February 11, 2015 article from the Business Insider, Michael Kelly and Pamela Engel detail twenty one lottery winners who blew it all (see http://www.businessinsider.com/lottery-winners-who-lost-everything-2015-2?op=1). In the article, there are details regarding the myriad of ways fortunes were lost. For example, “Lara and Roger Griffiths bought their dream home… and then life fell apart.” Or worse yet, “Bud Post lost $16.2 million within a nightmarish year — his own brother put out a hit on him.” Or the all too common situation of “Sharon Tirabasssi” who “is back in the working class after winning $10 million 11 years ago.”

These stories are eerily similar to many anecdotal statistics frequently disseminated regarding personal injury victims who receive settlements. The statistic normally thrown around is that 90% of injury victims have nothing left within five years. While there are no scientific studies to back up that statistic according to some scholarly pieces written by several authors, it is undeniable that sudden wealth can have catastrophic results. Public benefits that are critical to future needs can be lost. Money can be mismanaged in a way that the injury victim winds up victimized a second time.

When a personal injury case settles there are options available to protect the settlement proceeds. The first option is to take the money in a single lump sum. Of course that presents the trap mentioned at the beginning of this article – rapid dissipation. Trying to figure out how to properly manage a large personal injury recovery can be a daunting task for not only the injury victim but also for their loved ones. There are so many ways to mismanage a fortune. In addition, needs based benefits will be lost in most instances since as little as $2,000 can cause ineligibility. This can leave the injury victim with huge medical expenses and no way to pay for them without spending the recovery for their care.

Because of the many down sides to taking a lump sum when settling a personal injury case, many injury victims are offered a structured settlement annuity. This is the second option. A structured settlement annuity is an income tax-free investment vehicle available exclusively to injury victims. There are many reasons to set up a structured settlement. First, the interest earned is income tax-free. There are no ongoing money management fees as it is self-executing. In most instances it enjoys enhanced creditor-judgment protection. It is spendthrift, meaning it can’t be dissipated quickly. The money is safe from predators and family members as well. In short, it is a protected asset with tax favored treatment. It is similar to having a job you can’t be fired from since you have a guaranteed income stream. Sound too good to be true? It isn’t without its faults. Once it is set up, it can’t be changed, accelerated or deferred. It can’t be sold (without taking a huge loss). The rates of return are conservative (think bond returns).

The third option is a settlement trust. Settlement trusts are a good alternative to taking the money in a lump sum or structuring the entire settlement. This is so because it provides spendthrift protection with liquidity and flexibility. Typically a settlement trust is created with some ongoing periodic distributions for living needs paired with a cash reserve that can be accessed for larger purchases. This allows the injury victim the best of both worlds while still offering protection of the monies from abrupt dissipation. As with structured settlements, it isn’t without faults. These trusts are typically permanent and can’t be undone. There are ongoing trust administration costs as well as tax on the interest earned.

There is a fourth option which is a combination of all of the foregoing three. Frequently, a lump sum is taken for immediate needs such as the acquisition of a house or car (perhaps both). Plus cash for other immediate needs such as paying off high interest debts or loans. The remaining funds can be split between a structured settlement annuity and a settlement trust. By pairing a tax-free structure with a trust, it provides a sound tax-advantaged financial plan for the recovery. It lowers the annual cost of trust administration as well since most trustees will only charge fees on assets held in the trust. In the end, the best plan is one that meets the needs and has enough flexibility to deal with changes in circumstances. Because taking a lump sum or just a structured settlement alone limits the options, it isn’t recommended for most personal injury settlements.

The key is finding an experienced professional settlement planner to work with. It is important to make sure that the planner has all of the different tools in his/her arsenal to properly create an all-encompassing plan. If a planner doesn’t have access to all of the financial products in the marketplace, doesn’t have the necessary professional qualifications and doesn’t ask the tough questions about needs/wants/desires, then find someone that will do so. Choose a firm that has experts on staff that can also analyze the public benefit preservation issues along with the options under the Affordable Care Act. Medicaid/Medicare eligibility, ACA coverage and liens can make for some tough issues at settlement, make sure the team includes experts that can help navigate those issues along with the financial planning issues.

Finally, plaintiff counsel should also explore options to protect their contingent legal fees. There are some great ways to invest fees on a pre-tax and tax deferred basis (see www.structuredfees.com). Attorneys can have sudden money problems too.

Contact Synergy today for more information at (877) 242-0022 or by clicking here.

Recent Liability Medicare Set Aside Case Law – No MSA Needed

B. Josh Pettingill, MBA, MS, MSCC
Vice President of MSP Compliance

The “law” as it relates to Medicare Set Asides in liability settlements is an evolving area with new developments happening quite frequently. This year there have already been several noteworthy legal decisions pertaining to the protection of Medicare’s future interest in liability settlements. Below is a discussion about a recent case with important pointers for attorneys and plaintiffs when there will be no future care.

Berry vs. Toyota

On January 10, 2015, the United States Western District Court of Louisiana released its opinion in Berry vs. Toyota Motor Sales. The court concluded there was no need to establish a Medicare set aside, given the fact that all of Mr. Berry’s treating physicians signed affidavits indicating no future accident-related treatment was going to be required. It was not surprising the court came to this conclusion given that there was already a Centers for Medicare and Medicaid Services (CMS) policy memorandum from the CMS headquarters indicating the same. Below is an excerpt from the memo:

Where the beneficiary’s treating physician certifies in writing that treatment for the alleged injury related to the liability insurance (including self-insurance) “settlement” has been completed as of the date of the “settlement”, and that future medical items and/or services for that injury will not be required, Medicare considers its interest, with respect to future medicals for that particular “settlement”, satisfied. If the beneficiary receives additional “settlements” related to the underlying injury or illness, he/she must obtain a separate physician certification for those additional “settlements.”

In other words, there is no need to establish a Medicare set aside if the treating physician attests in writing that no Medicare covered future treatment is needed for accident related care.

Facts of the Case:

All of Mr. Berry’s primary physicians signed affidavits indicating no future treatment was required as related to the accident.
Mr. Berry signed an affidavit indicating he was not going to treat in the future for accident related care.
The settlement was contingent upon the court ruling no MSA was needed and that both sides had adequately taken into account Medicare’s interests.

Holding:

The court held that based upon the evidence submitted no MSA was required. This was based upon the affidavits of the treating physicians which went to reasonably foreseeable future medical needs or lack thereof.

The Takeaways:

The court’s opinion was in line with the CMS policy memorandum of September 2011.
There is no special attestation form provided by CMS for treating physicians or the plaintiff to sign. All that is needed is an attestation on the physician’s letterhead indicating no future treatment is required for accident related care.
A court can recognize and affirm Medicare’s interests have been adequately taken into account by the settling parties if so desired.

All parties felt the need to get the court’s blessing that Medicare’s interests were adequately taken into account even though a policy memorandum from the CMS regional headquarters on this exact issue already existed. The plaintiff also had to sign an affidavit indicating he was not going to treat in the future for accident related care. Without knowing the exact details, we have to assume both sides were overly concerned about protecting Medicare’s interests to take such actions. Let’s revisit the CMS policy memorandum issued by CMS headquarters on September 30, 2011.

This CMS memorandum is important for a number of reasons. It is the first and only official memorandum from CMS headquarters in Baltimore to address liability Medicare set asides. It also provides a mechanism, if the case facts fit the criteria, to avoid the necessity of establishing a liability Medicare set aside. As discussed above, this memorandum provides a limited exception as the treating doctor must attest in writing that all of the treatment for the released injuries was completed at the time of settlement.

When the case facts meet the criteria, securing the attestation from the treating providers is only part of the steps toward MSP compliance. In addition, attorneys still need to educate their clients on potential future ramifications of the attestation. Specifically, if a plaintiff ever has to treat again in the future for accident related care; they can’t seek to have Medicare cover that care. This case and more importantly the memorandum, gives clear guidance to the plaintiff when there is no future accident related treatment as to how to properly document what they did to comply with the MSP.

Synergy was recently retained on a case where the plaintiff was a current Medicare beneficiary and claimed he would not need any future accident related treatment. Post settlement, the plaintiff requested the attestation from his treating physician indicating the same. However, his physician refused to attest in writing that he would never require any additional treatment related to his accident. Ultimately, the plaintiff engaged Synergy to prepare a zero allocation report as evidence that Medicare’s interests had been taken into account. After Synergy reviewed all of his medical records and prescription payouts, it was determined there was in fact a nominal amount that should be set aside. The MSA report we prepared documented that Medicare’s interests had properly been taken into account by setting aside a small amount for future care.

For those plaintiffs who are a current Medicare beneficiary and future medical care is funded by the settlement, obtaining a Medicare set aside analysis is always the best practice. There are numerous ways to deal with Medicare secondary payer compliance to ensure all parties to the settlement are protected. At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.

For all of your Medicare secondary payer compliance needs, please visit us at www.synergysettlements.com or call us at (877) 242-0022.

Liability Medicare Set Asides, Insurance Carriers and Unsubstantiated Demands

Insurance carriers are bringing up the Medicare set aside (MSA) “issue” when it comes time to draft the release more frequently. In many instances, the plaintiffs are not yet eligible for Medicare benefits, nor may they ever be entitled to receive Medicare benefits. Plaintiff attorneys need to proceed with caution with regard to the Medicare set aside release language. Inappropriate provisions in the release could constrain their client’s options relative to receiving public benefits and have adverse tax implications, which could result in a legal malpractice claim.

As a recent example, Synergy was asked to review Medicare release language. The insurance carrier insisted the plaintiff agree to language indicating he would not ever apply for social security disability benefits. Agreeing to this would impede his ability to receive disability income and eventually Medicare benefits. In another case, the insurance carrier insisted the plaintiff not only establish an MSA but also submit the MSA to the Centers for Medicare and Medicaid Services (CMS) for review and approval. The insurance carrier attempted to build these terms into the mediation agreement. This client was receiving Medicaid benefits but was never going to be eligible for Medicare since she had not earned enough working credits to qualify.

These problems are occurring because some MSA vendors, in an effort to drive business, have been convincing insurance carriers that failing to do a set aside in any case exposes them to future liability/consequences if not properly addressed. CMS has made it clear that the MSA issue is the plaintiff’s responsibility and the role of the defendant is to report current Medicare beneficiaries under Section 111* mandatory insure reporting. The reality is that the defendant has no exposure but plaintiff counsel has legal malpractice risks if they fail to properly advise the client regarding the set aside issue when they are a current Medicare beneficiary or have a reasonable expectation of becoming one within 30 months.

If you have a client who is a current Medicare beneficiary that is going to require accident related care in the future and there are funds earmarked towards future medical treatment, a Medicare set aside should be considered. However, there are numerous ways to deal with Medicare secondary payer compliance to ensure both your firm, as well as your clients are protected. At Synergy, we have the solutions that will help you settle cases compliantly for Medicare beneficiaries.

*It should be noted that it is impossible for a defendant/insurance carrier to report a claim to Medicare when the plaintiff is not a current Medicare beneficiary.

– See more at: file:///Volumes/Design/Source%20Files/Synergy%20Settlement%20Services/Website%20Development/Site%20Backup%20Feb%202015/www.synergysettlements.com/blog/16719/index.html#sthash.ZM4Itxay.dpuf

Applying Collateral Source Statutes to ERISA after Wurtz

Applying Collateral Source Statutes to ERISA after Wurtz

The U.S. Court of Appeals for the 2nd Circuit rendered a major decision on July 31, 2014 holding that New York’s anti-subrogation statute is “saved” from ERISA preemption. (Wurtz v. The Rawlings Company, — F.3d—, 2014 WL 3746801). This ruling holds that neither the express preemption found in 29 U.S.C. § 1144(b)(2)(a) nor the complete preemption of 29 U.S.C. § 1132(a)(1)(B) protects the ERISA plan from New York’s anti-subrogation statute (N.Y. Gen. Oblig. Law § 5‐335).

ERISA plans are able to preempt all state laws, except if the law relates to banking, insurance or securities.

“[T]he provisions of this … chapter shall supersede any and all State laws insofar as they may now or hereafter relate to any employee benefit plan…”

29 U.S. Code § 1144 (a)

However,

“[N]othing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.”

29 U.S. Code § 1144 (b)(2)(a)

The New York anti-subrogation statute in question, § 5-355, specifically stated that:

“[I]t shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services … to the extent those losses … have been … reimbursed by an insurer.” Id.

And

“No person entering into such a settlement shall be subject to a subrogation claim or claim for reimbursement by an insurer and an insurer shall have no lien or right of subrogation or reimbursement” Id.

The 2^nd Circuit in New York found that this statute was “saved” under 29 U.S. Code § 1144 (b)(2)(a) as a law that “regulates insurance.” The standard used by the Court in Wurtz was established in the 2003 case Kentucky Ass’n of Health Plans, Inc. v. Miller, 538 U.S. 329. That case established a two prong test.

A law “regulates insurance” under this savings clause if it (1) is “specifically directed toward entities engaged in insurance,” and (2) “substantially affect[s] the risk pooling arrangement between the insurer and the insured.” Id. at 342

In analyzing the first prong of the test the Wurtz court followed the broad rule established in the seminal ERISA case, FMC Corp. v. Holliday, 498 U.S. 52 (1990). In that case the Supreme Court found that the expansive statutory language at issue “[a]ny program, group contract or other arrangement” was more than sufficient to constitute being “specifically directed” at insurance. In fact, the Supreme Court found that even though broad language “does not merely have an impact on the insurance industry, it is aimed at it.” Id. at 61. This is a very helpful point for trial attorneys who will be seeking to apply broadly written collateral source statutes against subrogation claims being asserted by ERISA plans.

The Wurtz court reasoned that the second prong was satisfied by determining that the question of does the statute “substantially affect[] risk pooling” to be an analysis of the impact when the law applies, rather than a question of to how large a group does the statute apply.

“[T]he test is not whether the law substantially affects the whole insurance market—the test is whether the law substantially affects how risk is shared when it applies. For example, even though only a subset of insureds suffer from mental illness, the Supreme Court has held that a law requiring minimum mental health care benefits regulates insurance and is thus saved from preemption. Metro. Life Ins. Co. v. Massachusetts, 471 U.S. 724, 743 (1985).”

Id. at 11

This is the same analysis that First Circuit of Florida undertook when it reached its opinion in 2010. (Coleman v. Blue Cross and Blue Shield of Alabama, No. 1D10-1366, December 8, 2010). The ERISA plan in Wurtz was a fully insured plan, which means once N.Y. Gen. Oblig. Law § 5‐335 was “saved” it applied to the plan. The ability to use the Wurtz rational against self-funded ERISA plan’s, especially in states like Florida, may prove a difficult challenge.

Self-funded ERISA plan’s enjoy unparalleled recovery rights in large part due to the “deemer” clause of 29 U.S. Code § 1144 (b(2)(b). Self-funded ERISA plans are not “deemed” to be insurance and thus even “saved” insurance statutes do not bind them.

“[No self-funded] employee benefit plan … shall be deemed to be an insurance company … or to be engaged in the business of insurance … for purposes of any law of any State purporting to regulate insurance companies, insurance contracts…” Id.

Thus, most anti-subrogation laws like N.Y. Gen. Oblig. Law § 5‐335 have no ability to regulate self-funded ERISA plans. Even Florida’s 768.76 has been “saved” but found inapplicable to self-funded ERISA plans. (See, Coleman v. Blue Cross and Blue Shield of Alabama, No. 1D10-1366, December 8, 2010). Despite the fact that Florida’s collateral source statute applies to a wide range of parties it does not capture self-funded ERISA plans.

The Coleman court explained the three step process for how these self-funded plans escape 768.76 rather succinctly when they wrote:

“State laws directed toward the plans are pre-empted because they relate to an employee benefit plan but are not “saved” because they do not regulate insurance. State laws that directly regulate insurance are “saved” but do not reach self-funded employee benefit plans because the plans may not be deemed to be insurance companies, other insurers, or engaged in the business of insurance for purposes of such state laws” Id.

Despite this reasoning the Coleman court reminds the plaintiff’s bar that insofar as an ERISA plan is covered by insurance, the Plan is bound by state regulations that would apply to their insurance carrier. (See also, FMC Corp. v. Holliday, 798 U.S. 52 (1990). This language, the fact of the remand in Coleman, and the reasoning of Wurtz mandate that the wise plaintiff’s attorney verify the funding status of the ERISA plan in question. Obtaining the Master Plan Document via a proper 29 U.S.C. 1024(b)(4) request is more important than ever.

In practice the plaintiff’s attorney should attempt to have the self-funded ERISA plan realize the application of Wurtz, Coleman, and FMC to them for the portions of their payments that came from an insured plan or were reimbursed by stop-loss coverage. It is always a solid practice for Florida attorneys to send the ERISA plan a 768.76(6) notice. If the plan does not comply with 768.76(7), inform them that the portion of their claim that represents payments from an insured plan or from a self-funded plan reimbursed by stop-loss coverage has been waived under the above rationale. This should also mean that 768.76(8) will cut off the accrual of that portion of their lien at the settlement date. Additionally, if a resolution is not agreed to, an equitable distribution hearing can be requested. However, it is unlikely that self-funded ERISA plans or their recovery vendors will capitulate on this point. Despite their unwillingness to openly agree with this reasoning, it should give them sufficient pause so they will consider a reasonable compromise.