Paying entities may be eligible for cost payback

When an employee is injured by a third party's negligence and his medical expenses are paid for him by either his own health insurer or by his employer's, are those paying entities entitled to be paid back from the employee's recovery against the negligent party or his insurer?

What if his employer's Employee Retirement Income Security Act benefit plan paid the medical expenses?

What rights do health providers such as doctors and hospitals have to see to it that their bills are paid from a plaintiff-employee's recovery, if no insurer or plan has paid the bills at the time of the recovery by settlement or suit? This article examines these issues.

The Employee Retirement Income Security Act (ERISA) 29 U.S.C. 1001, et seq., is the supreme federal law governing the administration and interpretation of employer sponsored benefit plans provided to employees.

The ERISA statute supersedes any conflicting state law governing issues pertaining to the plan when there is a conflict.

Under Missouri state law, there is no subrogation right for the medical insurance company that pays the employee's medical bills for a non-job-related accident. There is a workers' compensation lien given to the workers' compensation carrier that pays for an employee's injury on the job and job-related medical expenses.

Subrogation is an equitable concept that means someone else stands in the shoes of the party injured.

When medical expenses are paid under an ERISA plan provided by an employer, and when the plan document provides for a subrogation right, then the plan stands in the shoes of the injured party plaintiff to the extent of the medical expenses it paid for his right of recovery against the negligent defendant or party liable to him for his injuries.

In other words, contrary to Missouri insurance law, ERISA supersedes, and the plan can recover the medical expenses it paid on behalf of the injured employee. This is primarily because medical expenses are paid by self-funded plans (full or partial) with employer and/or employee contributions.

In a typical personal injury accident, for instance a car accident, let's assume the non-negligent plaintiff breaks his arm and incurs surgical, pharmaceutical and hospital expenses that total $10,000. His medical insurance company (not pursuant to an ERISA plan) pays the $10,000 in medical expenses.

The employee has a right of action against the negligent defendant for his personal injuries, which include his medical expenses, lost income, and pain and suffering.

Under Missouri law, the jury will not be advised that the medical insurance company (or ERISA plan) paid his medical expenses.

The plaintiff-employee will obtain his recovery by settlement or judgment, which should theoretically include his medical expenses, along with his pain and suffering and lost income. The plaintiff-employee will not have to pay back the medical insurance company that made those payments to his health care providers.

However, if an ERISA medical insurance plan had paid the $10,000 in medical expenses, and the plan had a subrogation agreement, then the plaintiff employee, who recovers by settlement or judgment, or the negligent defendant would have to pay back to the plan the $10,000 medical expenses that the plan paid on behalf of the plaintiff-employee.

Under ERISA, the employee would not get a double recovery as he did with a non-ERISA medical insurance payment. In fact, he would receive no net recovery for his medical expenses other than the benefit that had been paid by the ERISA health plan to his medical providers, which would then be paid back to the plan from his recovery by settlement or judgment.

Under state law, Section 430.225, et seq., "health practitioners," i.e. hospitals, clinics, dentists, physicians, surgeons, chiropractors, optometrists, podiatrists and anesthesiologists, do have liens against the recovery of the injured party plaintiff from the negligent defendant and/or his insurer.

If hospitals and health care practitioners follow the statutorily prescribed procedure for perfecting their liens, then they can receive payment for the reasonable medical services they render from the proceeds of any recovery by their patient, an injured-party plaintiff, against a negligent defendant or his insurer, whether by lawsuit or by settlement.

Their combined lien is limited to a maximum of 50 percent of the net proceeds to an injured party, with each provider being paid pro-rata.

Any health care provider receiving benefits under the statute must then release the claimant (plaintiff-employee) from further liability on the "cost of services and treatment provided to that point in time."

(Richard Paul Wacker is a partner with the law firm of Daniel, Clampett, Powell & Cunningham.)