The Affordable Care Act: Injury Victims Beware

By Daniel J. Alvarez, J.D., Vice President & General Counsel

As has been well publicized, it was revealed last week on healthcare.gov that fewer than 27,000 people signed up for private health insurance last month in the 36 states relying on a problem-filled federal website. States running their own enrollment systems signed up more than 79,000, for a total enrollment of just over 100,000.

Even more concerning then the technological challenges with the system, is whether consumers have the necessary knowledge of health insurance to be making these decisions by January 1, 2014. According to poll results released in August 2013 by the American Institute of CPAs, more than half of Americans are not equipped with the rudimentary knowledge of health insurance concepts and definitions to understand the basics of health insurance plans. http://www.aicpa.org/press/pressreleases/2013/pages/us-adults-fail-health-insurance-101-aicpa-survey.aspx

Findings of the poll include the following:

51 percent of adults surveyed could not accurately identify at least one of the three most common health insurance terms present in insurance contracts: premium, deductible, or copay.
34 percent thought a premium was an expense at the time of receiving medical service or a prescription.
27 percent thought a copay was the cost of obtaining insurance.
12 percent did not know a deductible is the money one pays before an insurance company makes payments.
41 percent of those surveyed were not knowledgeable about the ACA.
48 percent of young adults ages 18 to 34 having no knowledge of the change in health care laws.

For personal injury victims, an accurate understanding of these issues is even more critical as they attempt to make insurance coverage decisions that will affect them for the rest of their lives. For example, the question as to whether it is better to enter the exchanges versus using planning techniques to remain eligible for public benefits need to be thought through and addressed. The impact of the ACA on personal injury victims could be dramatic from not only a planning perspective, but also in terms of limiting future damages. It has been argued by legal commentators that future medical damages will be limited in lawsuits to the cost of providing health insurance through the exchanges. Time will tell whether the collateral source rules will be altered once the ACA’s coverage is in place for a period of time. See http://college.holycross.edu/RePEc/hcx/Matheson-Congdon_ACATortAwards.pdf

When navigating the transition from litigation into life, plaintiffs must seek out a knowledgeable partner to assist in making these complex determinations. At Synergy, we have worked with plaintiffs for years in navigating the intersection of public benefits, private insurance and settlement planning. We will continue to be closely tracking the implementation of the ACA and its impact on settlement planning.

Medicare Gives Refunds? How Can My Client Get One?

By Director of Lien Resolution

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 that 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 straightforward 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

Will Obamacare End ERISA’s Subrogation Tyranny?

By Synergy’s Director of Lien Resolution Services

In the wake of the disastrous holding in U.S. Airways v. McCutchen, 569 U. S. (2013) plaintiffs and their attorneys are crying out for an end to the Draconian tyranny of self-funded ERISA plans’ subrogation practices. As you may recall, Mr. McCutchen was severely injured, incurring nearly $67,000.00 in medical damages, in a motor vehicle accident that killed or seriously injured three (3) other people. Mr. McCutchen was able to recover $10,000.00 from the tortfeasor’s Bodily Injury coverage and another $100,000.00 from his own Under Insured Motorist coverage. Despite this six figure recovery, Mr. McCutchen was $867.00 worse off from having brought a claim due to paying attorney fees, litigation costs, and repaying the U.S. Airways self-funded ERISA plan. In light of this reality, the question being raised by so many is “will the Patient Protection and Affordable Care Act (“PPACA”) bring any relief?”

It may be that the “PPACA”, also often referred to as “Obamacare”, will end the ability of self-funded plans to call equity “beside the point”. This was the phrase used by the U.S. Supreme Court in Sereboff v. Mid Atlantic Medical Services, Inc., 547 U. S. 356 and reiterated in U.S. Airways v. McCutchen when discussing the impact of “equity” on the express terms of a self-funded ERISA plan’s contract for health benefits. That possibility has the insurance industry very concerned given the importance of self-funded insurance “products” to their bottom line. According to report by Loyola University Professor John D. Blum 55% of all workers, 73 million, are in self-funded ERISA plans. Moreover, he has found that 89% of employers with 5000 or more employees use self-funded ERISA plans. The insurance industry fears that the “PPACA” may live up to its name and actually “protect” patients from the inequitable actions of the ERISA recovery vendor.

The fear of the insurance industry could have a basis in reality. The Self-Insurance Institute of America (“SIIA”) has estimated that a migration from self-funded plans to the new federal and state exchanges under “PPACA” might be as high as 48%. Professor Blum notes that this will make the self-funded pool much smaller and thus make those plans more costly. Cost savings, and reduced premiums have been key marketing points for the insurance industry as they purvey their self-funded products. In fact, in a letter to Congressman Henry Waxman the self-funded insurance lobby stated that “[r]ecoveries from subrogation and reimbursement reduce health plan costs and allow employer health plans to provide more benefits at a lower cost to their employees.” This letter was sent at a time when the House of Representatives was considering the America’s Affordable Health Choices Act of 2009 and specifically an amendment that expressly applied the “made whole” doctrine. The “made whole” doctrine is an equitable axiom that the injured party must be “fully compensated” for his/her damages before any collateral source can assert a claim for subrogation/reimbursement. The insurance lobby would rather that this common sense principle of fairness remain “beside the point.”

The possibility that their might be a way out for the plaintiff who formerly had group health insurance provided as a participant in his/her employer’s self-funded ERISA plan has the recovery vendors nervous as well. As every experienced plaintiff’s attorney knows there is an entire industry that has emerged over the past quarter of a century to enforce the subrogation/reimbursement rights of self-funded ERISA plans. These recovery vendors; such as Rawlings, HRI, Ingenix, and ACS participate in conferences, seminars and continuing education with their “in-house” colleagues to stay current on the developing trends in this specialized area of practice. At its annual conference in November 2012 the National Association of Subrogation Professionals (“NASP”) had a presentation entitled “Will Obamacare and National Insurance Exchange Spell the End of ERISA Remedies?”. This topic was of such a salient concern that it was Daran Kiefer, the “NASP” President, who delivered the presentation.

With just months left until “PPACA” begins opening exchanges it is still unclear what impact these exchanges will have on ERISA subrogation/reimbursement rights. In the early stages of healthcare reform negotiations this issue was raised by two Democrats – Rep. John Barrow of Georgia and Rep. Bruce Braley of Iowa who introduced the Barrow/Braley Subrogation Amendment to HR 3200 America’s Affordable Health Choices Act of 2009. As I explained above this amendment was immediately met with strong resistance from the insurance lobby. The proposed amendment allowed for the application of both “made whole” and “common fund” to all Qualified Health Benefit Plans (“QHBP”):

“With respect to any qualified health benefits plan requiring an enrollee to reimburse the QHBP offering entity (health plan) for any amount recovered from any source relating to a personal injury or similar type of claim, subrogation or reimbursement is permitted only if the enrollee has been fully compensated for all damages arising out of such claim. Any plan provision to the contrary is not enforceable. Insofar as subrogation or reimbursement of benefits is permitted, the subrogation or reimbursement amount shall not exceed the amount allocated to the categories of damages for those benefits in the settlement or judgment, less a pro rata share of any fees and expenses incurred in securing the settlement or judgment.”

Despite the efforts of some, including the support of the American Association for Justice, the “PPACA” has no provision that deals with these rights. In the end neither this language, nor any language dealing with subrogation/reimbursement rights, was included in the final bill that became “Obamacare”.

In discussing this issue with some of the leading minds on ERISA subrogation/reimbursement the consensus seems clear, nobody knows what impact the “PPACA” will have in this area. Professor Baron of South Dakota University School of Law is often on the forefront of developing ERISA issues and maintains a close circle of ERISA experts. Professor Baron informs us that he too has heard similar conclusions from his cadre of ERISA gurus. Despite this lack of guidance a few things are clear; the insurance industry is nervous, and just about anything would be an improvement over the 100% repayment standard of U.S. Airways v. McCutchen and its “beside the point” view of equity.

For help with resolving complicated lien issues, turn to Synergy. Visit our lien resolution unit’s site at www.synergylienres.com Try out our unique approach to resolving liens.

What is the SOL for Medicare Conditional Payments?

What is the statute of limitations for Medicare to institute an action for repayment of conditional payments used to be a question with more than one answer. In the past the Centers for Medicare and Medicaid Services (“CMS”) had argued that the six (6) year limitation period contained in the Federal Debt Collection Act for claims arising out of contract was the correct standard for the plaintiff attorney. That statute provides:

“every action for money damages brought by the United States or an officer or agency thereof which is founded upon any contract express or implied in law or fact, shall be barred unless the complaint is filed within six years after the right of action accrues…”

28 USC § 2415(a)

The plaintiff’s bar and Medicare enrollees argued that the shorter three (3) year statute of limitations was the correct standard for claims arising out of tort. That statute provides:

“every action for money damages brought by the United States or an officer or agency thereof which is founded upon a tort shall be barred unless the complaint is filed within three years after the right of action first accrues…”

28 U.S.C. § 2415(b).

When President Obama signed the Strengthening Medicare and Repaying Taxpayers Act (“SMART”) on January 10, 2013 he answered this question in favor of Medicare beneficiaries. Additionally, unlike some of the other components of the “SMART” Act this section is self-enacting and does not need rule promulgation or post a proposed rulemaking in the Federal Register for this to be effective. By operation of statute this new time limit became effective six (6) months after signing. Therefore, all cases that settle after July 10, 2013 will be controlled by the three (3) year statute of limitations. The “SMART” Act reads in pertinent part:

“(a) In General.–Section 1862(b)(2)(B)(iii) of the Social Security Act (42 U.S.C. 1395y(b)(2)(B)(iii)) is amended by adding at the end the following new sentence: `An action may not be brought by the United States under this clause with respect to payment owed unless the complaint is filed not later than 3 years after the date of the receipt of notice of a settlement, judgment, award, or other payment made…’”

Pub. L. No. 112-242, § 205(a) (2013)

In the recent case U.S. v. Stricker, Lexis 15204 (11^th Cir. July 26, 2013) the court provides an excellent analysis of the above competing statutes of limitation and confirms that the “SMART” Act has resolved the controversy for settlements after July 10, 2013. The Stricker Court discussed the need and purpose of federal statute of limitations:

The purpose of a statute of limitations, such as 28 U.S.C. § 2415, “is to require the prompt presentation of claims.” Coppage v. U.S. Postal Serv., 281 F.3d 1200, 1206 (11th Cir. 2002) (internal quotation marks and citation omitted). Originally, there was no statute of limitations for lawsuits filed by the government. Congress, however, passed § 2415-a statute of limitations that applies to the United States [*14] -“to promote diligence by the government in bringing claims to trial and also to make the position of the government more nearly equal to that of a private litigant.” United States v. Kass, 740 F.2d 1493, 1496 (11th Cir. 1984).

The new three (3) year statute of limitations under the “SMART” Act addresses that need and the complaint of so many Medicare beneficiaries who wonder if there is ever an end to CMS’s demand for repayment. It is now incumbent on the plaintiff’s attorney to report settlements to CMS (via their contractor MSPRC) so that the three (3) year timer starts running as soon as possible.

For help with Medicare Conditional payment resolution, turn to Synergy. Synergy offers a unique post payment of final demand service where we attempt to secure a refund back from Medicare via the compromise/waiver process. There is a small administrative fee at the outset and then Synergy only gets paid if there is a refund on a percentage of savings basis. To learn more about Synergy’s lien resolution services, visit www.synergylienres.com

Synergy out flanks Rawlings and reduces self-funded ERISA claim by 50%

This case involved a self-funded ERISA plan participant who was injured in a motor vehicle accident. The plaintiff was injured when the car in which he was riding was rear-ended by the tortfeasor. The plaintiff incurred significant injuries which resulted in a healthcare subrogation claim, in the amount of $26,669.18, being asserted by the self-funded ERISA plan. The plaintiff’s attorney engaged Synergy Lien Resolution Services to resolve the subrogation/reimbursement claim that was being prosecuted by The Rawlings Company on behalf of Aetna and the employer group. Rawlings is a third party recovery vendor for Aetna, but despite this status they attempted to avoid dealing directly with Synergy by advising plaintiff’s counsel that they “limited communication” with lien resolution groups and offered a nominal reduction. Wise plaintiff’s counsel did not fall for this ruse. Synergy then negotiated directly with the Plan Administrator and within three (3) weeks had secured a reduction of 50% from Plan Administrator. This was a savings of $13,334.59 to the injured plaintiff.

What In The World Is FEHBA And How Do I Deal With Their Reimbursement Claim?

By Director of Lien Resolution

The Federal Employees Health Benefits Act (FEHBA) of 1959 (5 U.S.C. 8901 et seq.) is the largest employer-sponsored group health insurance program in the world, covering more than 8 million federal employees, retirees, former employees, and family members. FEHBA Plans are contracts between the insurance carrier and the United States Office of Personnel Management (OPM). Most federal employees are eligible to enroll in FEHBA Plans, although regulations exclude certain persons and positions (such as employees of the Tennessee Valley Authority and workers paid on a contract or piecework basis). After the determination of eligibility, the employee selects from available plans, many of which restrict enrollment by geographic region or category of service (e.g. the Foreign Service Benefit Plan and the Rural Carrier Benefit Plan).

FEHBA contains a preemption provision which provides that certain contract terms in health insurance plans “shall” preempt state or local law. The language of a FEHBA Plan preempts state law, whether consistent or inconsistent with federal plan provisions, on matters of “coverage or benefits” (5 U.S.C. 8902(m)(1)). However, the United States Supreme Court rendered an important decision limiting preemption under FEHBA in the case of Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 126 S. Ct. 2121 (2006). In McVeigh, The Supreme Court declined to exercise subject matter jurisdiction, holding that Section 8902(m)(1) does not raise a federal question to support federal jurisdiction. The Court noted it was undisputed that FEHBA did not expressly create a federal right of action, and the carrier’s right to reimbursement arose by contract, not federal law. The Court noted that FEHBA’s preemption clause displaced state law on issues relating to “coverage or benefits,” but

“[t]he Act contains no provision addressing the subrogation or reimbursement rights of carriers”

McVeigh at 683

therefore,

“No law opens federal courts to carriers seeking reimbursement from beneficiaries or recovery from.”

McVeigh at 687

The Court continued its analysis by stating in unequivocal terms,

“[I]f Congress intends a preemption instruction completely to displace ordinarily applicable law, it may be expected to make that atypical intention clear. Congress has not done so here.”

McVeigh at 698

“[A] reimbursement of the kind Empire here asserts stems from a personal injury recovery, and the claim underlying that recovery is plainly governed by state law. We are not prepared to say that under 8902(m)(1) an OPM-BCBS contract term would displace every condition state law places on that recovery.”

McVeigh at 698

The Court reasoned that along with the reimbursement right created in the FEHBA plan documents there was also a subrogation right which was mingled with the reimbursement right. Had the FEHBA Plan chosen to assert it subrogation right then,

“no access to a federal forum could have been predicated on the [FEHBA] contract right. The tortfeasors’ liability, whether to the insured or the insurer, would be governed not by an agreement to which the tortfeasors are strangers, but by state law.”

McVeigh at 698

Therefore, since there was held to be no federal cause of action to enforce such contract terms, any claims by FEHBA carriers for such reimbursement would have to be presented in state court.

“In sum, the presentations before us fail to establish that §8902(m)(1) leaves no room for any state law potentially bearing on federal employee-benefit plans in general, or carrier-reimbursement claims in particular. Accordingly, we extract from §8902(m)(1) no prescription for federal-court jurisdiction.”

McVeigh at 698

This rationale not only made it clear that FEHBA Plan’s must bring reimbursement actions in state court but also that state laws which impact that recovery right can be applied. In the wake of McVeigh, other federal circuit courts have issued opinions rejecting preemption of various state law provisions governing tort recoveries. In Blue Cross Blue Shield of Ill v. Cruz, 495 F.3d 510 (7th Cir. 2007), the court rejected preemption of the state’s “common fund” rule and in Van Horn v. Arkansas Blue Cross, 629 F. Supp 2d 905 (D. Ark. 2007), the court rejected preemption of the “made whole” doctrine. (See also, Morris v. Humana Health Plan, Inc., 829 F.Supp2d.848 (W.D. Missouri, 2011); Calingo v. Meridian Res. Co. LLC, 2011 U.S. Dist. Lexis 83496 (S. D. N.Y. 2011); Cedars-Sinai Med. Ctr. V. Natl League of Postmasters of the U.S., 497 F.3d 972 (9th Cir. 2007)).

To combat the rising tide of Federal Circuits supporting the above rationale, the U.S. Office of Personnel Management (OPM) issued an “FEHB Program Carrier Letter,” dated June 18, 2012 (the “OPM Letter”), which was sent to BCBSA and all other insurance carriers administering plans under FEHBA. OPM expressed its official position that FEHBA preempts state laws on issues of subrogation and reimbursement, and instructed carriers such as BCBSA to “utilize this correspondence as needed in your recovery efforts.” The OPM explained its reasoning as follows:

“FEHB Program contracts … require enrollees to reimburse the plan in the event of a third party recovery. Carriers are required to seek reimbursement and/or subrogation recoveries in accordance with the contract. The funds received by [carriers] from these recoveries are required to be credited to [a fund] established by 5 U.S.C. § 8909, held by the Treasury of the United States, and … subrogation and reimbursement recoveries serve to lower subscription charges for individuals enrolled in the Federal Employees Health Benefits Program. The carrier’s right to subrogation and/or reimbursement recovery is both a condition of, and a limitation on, the payments that enrollees are eligible to receive for benefits; the carrier’s contractual obligation to obtain them necessarily relates to the enrollee’s coverage or benefits (including payments with respect to benefits) under the FEHB program. These recoveries therefore fall within the purview of the FEHBA’s preemption clause, and supersede state laws that relate to health insurance or health plans.”

Despite the fact that all the legal authority cited in the “OPM Letter” by John O’Brien the Director Healthcare and Insurance for the OPM predates McVeigh, one federal district court was persuaded. In Calingo v. Meridian Res. Co., LLC, 2013 WL 1250448 (S.D.N.Y. 2013) (Calingo II), the Court gave deference to the OPM Letter noting that reimbursement and subrogation play an integral role in the overall administration of the Federal Employees Health Benefits Program and thus “relate to” the coverage and benefits of those insured under the program. Specifically, the Court noted that the OPM Letter explains that “subrogation and reimbursement recoveries serve to lower subscription charges for individuals enrolled in” FEHBA Plans, because monies recovered under contractual subrogation and reimbursement provisions are returned to the government and used to lower the subscription charges of all FEHBA enrollees. Therefore, the Court acknowledged that subrogation and reimbursement provisions in FEHBA benefits Plans directly reduce the amount of money enrollees pay for their health insurance, and presumably affect the benefits they receive.

In working to reduce or eliminate the amount your client must repay his FEHBA plan, plaintiff’s counsel should expect to receive both the “OPM Letter” and Calingo II from the recovery vendor. Despite the Southern District of New York’s reliance on the self-serving “OPM Letter” the rational of McVeigh and is progeny is still controlling. Claims for reimbursement by a FEHBA Plan must be brought in state court and state laws which bear on reimbursement rights of collateral sources can still be applied.

The first step in addressing the purported recovery rights of the FEHBA Plan should be to download and review the correct plan document. All FEHBA Plans can be viewed and downloaded on the OPM’s website at http://www.opm.gov/healthcare-insurance/healthcare/plan-information/.

This may address many issues such as if the particular plan allows for a reduction to reflect attorney fees. Secondly plaintiff’s counsel will need to obtain and audit the claim’s summary associated with their client’s specific date of loss. As is often the case, the claim’s summary is likely to include charges which are unrelated to the personal injury action. Finally, the plaintiff’s attorney should argue the rationale of McVeigh and use state collateral source laws to diminish or eliminate the FEHBA Plan’s reimbursement claim.

If you need assistance with a FEHBA lien reduction issue, Synergy can help. We specialize in reducing these liens so contact us today for a free assessment.

Add the Administrative Services Agreement to your ERISA Document Request

By Director of Lien Resolution

An Administrative Services Agreement between a Plan Administrator and a Claims Administrator may fall within the purview of a document request under ERISA 29 U.S.C. § 1024(b)(4), with non-compliance subject to the penalty assessment authorized under ERISA 29 U.S.C. § 1132(c). As Synergy has long advocated, one of the keys to properly defending against an asserted subrogation or reimbursement claim from an ERISA plan is making requests to the plan administrator. ERISA places certain responsibilities upon the Plan Administrator to assist with the proper management of ERISA qualified employee welfare-benefit plans and to promote communication with the plan beneficiaries.

One of the major responsibilities of the plan administrator, in so far as dealing with providing information to beneficiaries, is contained in 29 U.S.C. 1024(b)(4). This section of the statute deals with requests for information made upon the plan administrator:

29 U.S.C. 1024(b)(4)– The administrator shall, upon written request of any participant or beneficiary, furnish a copy of the latest updated summary plan description, and the latest annual report, any terminal report, the bargaining agreement, trust agreement, contract, or other instruments under which the plan is established or operated.

In Grant v. Eaton, S.D.Miss, Civil Action No. 3:10CV164TSL-FKB, decided 2/6/13, there was an allegation that the Administrative Services Agreement between the third party claims administrator and the plan administrator contained a provision that purports to grant discretion as well as authority from the plan administrator to the claims administrator. Due to this allegation of the transfer of certain rights from the Plan to the Claims Administrator, the court found that the Administrative Services Agreement was not excluded from the 29 U.S.C. 1024(b)(4) requests and the failure to provide the contract would subject the plan to penalties under 29 U.S.C. § 1132(c)(1)(B).

The court further reasoned that the Administrative Services Agreement contained information on “who are the persons to whom the management … of his plan … have been entrusted.” Hughes Salaried Retirees Action Comm., 72 F.3d 686, 690 (9th Cir. 1995). As a result, the Court found that the Administrative Services Agreement was subject to the ERISA disclosure requirements as it is a document “that restrict[s] or govern[s] a plan’s operation.” Shaver v. Operating Eng’rs Local 428 Pension Trust Fund, 332 F.3d 1198, 1202 (9th Cir. 2003).

The Southern District of Mississippi relied upon the rationale of other courts who had evaluated whether or not a 29 U.S.C. 1024(b)(4) request included Administrative Services Agreements. In Michael v. American International Group, Inc., No. 4:05CV02400 ERW, 2008 WL 4279582 (E.D. Mo. 2008), the court wrote at length on the issue, stating, in pertinent part,

“The proper inquiry for the Court to determine whether the contract at issue should have been disclosed is to consider whether the administrative services agreement “allow[s] ‘the individual participant [to] know … exactly where he stands with respect to the plan-what benefits he may be entitled to, what circumstances may preclude him from obtaining benefits, what procedures he must follow to obtain benefits, and who are the persons to whom the management and investment of his plan funds have been entrusted.”

(See also, Hughes Salaried Retirees Action Comm. v. Administrator of the Hughes Non-Bargaining Retirement Plan, 72 F.3d 686, 690 (9th Cir. 1995)).

The court also looked to the Eleventh Circuit and noted that the Eleventh Circuit has found that the Administrative Services Agreement may be subject to disclosure under ERISA not just as “other instruments under which the plan is established or operated” but as a “contract” pursuant to 29 U.S.C. § 1024(b)(4). Heffner v. Blue Cross and Blue Shield of Alabama, Inc., 443 F.3d 1330, 1343 (11th Cir. 2006). The Eleventh Circuit succinctly stated that “[a] contract between a group and an insurer such as Blue Cross is specifically listed as an ERISA document which may control a plan’s operation.”

The court also recognized Fisher v. Metropolitan Life Ins. Co., 895 F.2d 1073, 1077 (5th Cir. 1990) which noted that the Plan, by its own terms, contemplated delegation of the Plan Administrator’s responsibilities to a third party administrator “arguably incorporat[ed] the Administrative Services Agreement … as a further delineation of how the Plan would in fact operate”. Which meant disclosure of the Administrative Services Agreement was required under a 29 U.S.C. 1024(b)(4) request.

Though there is case law which stands for the opposite conclusion reached by the Southern District of Mississippi, the distinction seems to be one of degree. If the Administrative Services Agreement transfers any authority or discretion, or there are allegations that it does, from the Plan Administrator to another party then under the rationale expressed by the courts above that agreement needs to be provided in response to the beneficiary’s 29 U.S.C. 1024(b)(4) request. Similar to the requirement created by Cigna v. Amara, 131 S.Ct. 1866 which necessitates a comparison between the Summary Plan Description and the Master Plan Document, there is need to review the Administrative Services Agreement to determine if a transfer of authority or discretion has taken place. Under the cases cited, above failure of the Plan Administrator to provide the Administrative Services Agreement so that this review can be conducted could subject the plan to penalties under 29U.S.C. § 1132(c)(1)(b) & 29 CFR § 2575.502c-1.

Forcing a Plan Administrator to fully comply with its obligations under 29 U.S.C. 1024(b)(4) is one of the few ways to exert pressure on a self-funded ERISA plan who is attempting to enforce purported recovery rights. Understanding that neither the Plan Administrator, nor the Claims Administrator, wants to provide their Administrative Services Agreement can be used as a negotiation tool by the wise plaintiff’s attorney to reduce repayment. Get the documents your client is owed, or demand a discount from the Plan or recovery vendor.

Synergy can help with reduction or possibly elimination of ERISA liens. Contact us today to see how we can help you.

Synergy’s executive team brings an unparalleled amount of experience to assist you at settlement

Synergy allows trial lawyers to focus on what they do best. Our entire team is made up of experts who can help resolve the most complicated issues at settlement. Synergy’s executive team brings an unparalleled amount of experience to assist you at settlement. Jason Lazarus, Synergy’s CEO, is a former trial attorney practicing in the areas of workers’ compensation and medical malpractice. He has an LL.M. in Elder Law as well as multiple professional certifications including Medicare Set Aside Consultant Certified. To view Jason’s full bio click HERE. Anthony Prieto, Synergy’s President, is a Certified Financial Planner with 15 years of financial services experience. Anthony oversees Synergy’s settlement asset management group. To view Anthony’s full bio click HERE. Dan Alvarez, Synergy’s Vice President and General Counsel, is a former state attorney and plaintiff personal injury lawyer. Dan has developed significant expertise in Medicare Secondary Payer compliance. To view Dan’s full bio click HERE. Josh Pettingill, Synergy’s Vice President of Medicare Secondary Payer compliance has an MBA and is a PHD candidate in Economics. Josh’ oversees Synergy’s Medicare Secondary Payer compliance group and brings the unique insight of his certification as a Medicare Set Aside consultant. To view Josh’s full Bio click HERE. Dave Place, Synergy’s Director of Lien Resolution, is a former lead attorney for one of the largest ERISA recovery contractors in the United States. Dave’s experience allows him to provide invaluable advice and guidance regarding tough lien resolution issues. To view Dave’s full bio click HERE. Rodd Santomauro, Synergy’s Chief Operations Officer, is a former plaintiff personal injury attorney and Executive Director of a national non-profit. Rodd’s personal experience as a trial lawyer gives Synergy clients one more resource with spot on insight regarding the needs at settlement. To view Rodd’s full Bio click HERE. When the time comes, be prepared with a settlement services partner that can give you the edge you need.

Lien Res Success Story – Synergy use Medicare appeal process to secure a 100% reduction and $16,019.73 refund from MSPRC

Synergy successfully employed the Medicare appeals process and obtains a 100% reduction of Medicare’s Final Demand. This case involved a Medicare beneficiary who was injured in a motor vehicle accident. The beneficiary suffered back injuries as well as injuries to both his hand and foot. The injured beneficiary made a claim against the negligent tortfeasor and recovered a policy limits settlement in the amount of $25,000.00. Medicare asserted
a lien for the conditional payments they had made in the amount of $30,801.35. After the statutory reduction for procurement costs Medicare demanded repayment of the entire net settlement. The injured beneficiary received zero. Plaintiff’s counsel made the payment to MSPRC and engaged Synergy Lien Resolution Service. After submitting consecutive appeals
Synergy was successful in having MSPRC agree to reduce the demand amount to zero ($0.00) and issue a refund in the amount of $16,019.73. Had Synergy not aggressively used the Medicare appeals process, the injured beneficiary would have received nothing out of the settlement.