ERISA rights of repayment (NOT a lien)

Is there a statute of limitations on ERISA subrogation claims?

I am often asked the question, "Is there a statute of limitations on ERISA subrogation claims."  Most often, this question arises when a claim is settled and the lawyer had no knowledge of any ERISA subrigation rights and months or years later the lawyer receives a letter from a subrogation collection company.

Like so many legal questions, the answer is "maybe."  Possibly the better answer is, "you are best off to not ever have to ask this question."

The reason for the later response is that the law is very unclear on when the statute of limitations begins to run on an ERISA subrogation claim.  Obviously, if the Plan language sets out a clear statute for collecting on the claim, the answer may be easier, but I can't think of a Plan that has ever clearly set a statute within the subrogation language.

Because of that, the lawyer is left trying to reconcile federal ERISA law with state statutes of limitations and also to attempt to determine who had what notice of the insurance claim and when.


Professor Baron, one of the undisputed experts on ERISA law, wrote an excellent article setting out the case law on SOL issues in ERISA claims.  I highly recommend you read this article:

Professor Baron's website is treasure trove of good information on ERISA law:

Chris Nichols 1.800.906.5984

Can the tides of Change push back bad ERISA decisions? Let us Hope.

A great op-ed piece about the horrible and judicially mutilated zombie of ERISA Laws.

Rebalancing the scales of justice

Barack Obama must stop the supreme court from providing immunity to health insurers and other corporate law-breakers

  •, Thursday November 13 2008 18.00 GMT

Fourteen years ago, a single mother named Ann Dunham began a long, ultimately unsuccessful battle with cancer – and a simultaneous war with her health insurance provider. Over and over, as Ms Dunham's son, Barack Obama, recounted during the October 6 presidential debate, company representatives suggested that his mother's cancer "may have been a pre-existing condition and they don't have to pay her treatment".

Ann Dunham's story is hardly unique. Millions of Americans know well that the pain of serious illness is often compounded by endless jousts with insurers arbitrarily withholding coverage of physician-prescribed care. Myriad court records tell the stories of people like Maureen Kurtek, who lost five fingertips and most of her right foot after her husband's employer switched to an insurer which resisted continuing to cover her lupus treatment. And of construction manager James Lind, who was able to continue working despite his multiple sclerosis, until his insurer abruptly declined to continue paying for the prescription that had kept his MS at bay. And Rhonda Bast, who died after her insurer refused coverage of a bone marrow transplant which could have prevented her cancer from spreading to her brain.

Many of these sad stories could and should have been avoided. The fault lies with senior federal officials driven by the same deregulatory fervour responsible for enabling the imprudent lending frenzy behind the current financial crisis. In this case, however, the zealots do not run administrative agencies or departments. They preside at the United States supreme court. Over the past quarter-century, court majorities, led principally by Justice Antonin Scalia, have systematically dismantled the framework of laws designed to prevent benefit providers from breaking their promises to patients like Ann Dunham.

The keystone of this protective framework is the Employee Retirement Income Security Act, known by its acronym, Erisa. Congress passed Erisa in 1974 to protect the pensions and employer-provided health plans which millions of Americans rely upon. Yet the supreme court has twisted this law into something quite different. As noted by Senate judiciary chairman, Patrick Leahy, the court's perversion of Erisa is a prime example of decisions that have turned laws "on their heads, making them protections for big business rather than ordinary citizens."

Erisa sets strict standards to ensure that employers and insurers administering group benefit plans act "solely in the interests of beneficiaries for the exclusive purpose of providing benefits," not their own bottom-line. But the court has rendered these protections meaningless. In a Catch-22 decision written by Justice Scalia, a 5-4 majority held that, when plan administrators violate their obligations under the law, victims may not recover any monetary compensation for resulting losses they suffer. Adding insult to injury, the court has read Erisa as a warrant for "pre-empting" – ie abolishing – pre-existing state law protections, leaving victims with literally no recourse. Thus, in the words of, the late Justice Byron White, the supreme court has achieved the "perverse anomaly of leaving those Congress set out to protect with less protection than they enjoyed before Erisa was enacted."

When forced to apply the supreme court's "tangled" Erisa rules, ordinarily circumspect federal judges have often harshly attacked them. Most famously, the late Chief Judge Edward Becker, a Republican named to the third circuit court of appeals by President Reagan, excoriated Justice Scalia and his allies for converting Erisa "into a shield that insulates HMOs from liability for even the most egregious acts of dereliction committed against plan beneficiaries, a state of affairs directly contrary to the intent of Congress." Judge Becker stressed that the court's distortion of Erisa creates "strong incentives for HMOs to deny claims in bad faith or otherwise 'stiff' participants." The systemic result, he added, is a "'race to the bottom' in which the most profitable HMOs will be those that deny claims most frequently."

A recently discovered insurance company memo (pdf) confirms Judge Becker's insight. This smoking gun, an internal company directive, instructed claims processors to structure "new and existing policies" so as to ensure that they would be subject to Erisa. Once covered by this federal law originally hailed as a landmark safeguard for beneficiaries, the memo forecast, the company could eliminate over 90% of its payouts to claimants seeking redress for denials of coverage.

Immunity for health insurers is just one gift which the supreme court has given to powerful interests that find compliance with the law inconvenient. The most notorious recent example is the 2007 Ledbetter decision, in which the court's five conservatives held that victims of pay discrimination have only six short months to seek relief – even if they do not learn of the discrimination until years later. But the supreme court has also thwarted Congress' efforts to protect Americans with disabilities against discrimination (pdf). It has erected unprecedented barriers to patients seeking redress for unlawfully withheld Medicaid benefits, pre-empted state predatory lending (pdf) curbs, and extended lawsuit immunity to the manufacturers of dangerous medical devices. In case after case, the court has achieved de facto repeal of federal guarantees by eliminating citizens' ability to enforce them in court, and, through pre-emption, secured outright repeal of state law protections.

As the new president rolls out new proposals for ensuring health and economic security, he should not ignore the court's drive to roll back existing safeguards. If he acts fast, he could score some significant early wins, and send a clear signal that the new sheriff in town is serious about justice for ordinary citizens. Early in this Congressional term, it could be possible to legislatively "fix" decisions that distort major laws like Erisa and the Civil Rights Act equal pay guarantees upended in the Ledbetter case. His agency heads can rescind the mass of Bush administration regulations and policies that pre-empt vital state legal protections. His justice department can press the federal courts to faithfully construe laws in line with their original reformist purposes, and stop importing stealth deregulatory designs recently in vogue. Most important for the long-term, the president, together with allies in the Senate, can sensitise new judicial nominees to the priority of robust enforcement of guarantees protecting Americans' pocket book needs.

By targeting courts that coddle corporate law-breakers, President Obama can engineer change that will save millions of Americans from major financial, physical, and emotional travail.

Simon Lazarus and Ian Millhiser are attorneys with the National Senior Citizens Law Centre 1.800.906.5984

Could prisoners escape ERISA claims for subrogation?

The WorkPlaceProf Blog has posted an interesting case which has some very minor posisbilities of being a "nose under the tent" in NC to avoid ERISA liens.  Basically, the case cited from the US Supreme Court has allowed a state to trump ERISA in order to "take" money away from a retirement plan for a prisoner to pay for his "stay" in prison. 

My thought is that if a State can usurp ERISA, and the SCOTUS allows that, why would the NC Anti-subrogation provision promulgated by our Commissioner of Insurance not do the same.  Yeah, I know it is the whole "federal preemption argument" but if we keep seeing "holes" created in ERISA, maybe one will get big enough one of these days.    I know this is a stretch.  A big stretch.

From WorkPlaceProf Blog:

Ya win some, ya lose some if you're the ERISA bar.  In this instance, whereas the Supreme Court decided to hear LaRue v. DeWolff, Boberg & Associates , 06-856, it has denied review in the ERISA inalienability case of Cox v. DaimlerChrysler (06-273).   

In Cox, SCOTUSBlog commented that the issue was whether:

it violates ERISA for a state to arrange to take 90 percent of a prison inmate's pension benefits to help defray the costs of imprisonment. The Solicitor General, asked by the Court for the government's views, had urged the Court to bypass the appeal by Michigan's state attorney general, Mike Cox.

The whole inalienability question within ERISA in the criminal context  will continue to percolate through the Courts. For example, see this post on United States v. Novak, 04-55838 (9th Cir. Feb. 22, 2007), in which the en banc Ninth Circuit found in a 10-5 decision that the Mandatory Victim Restitution Act (MVRA) trumps ERISA's anti-alienation provisions that normally would keep retirement benefits from being disturbed by others.


Chris Nichols 1.800.906.5984

How to Identify if a Health Plan Falls Under ERISA: Form 5500 and more

Who do you have to pay back from a settlement?
North Carolina is one of a few states which does not allow health plans to seek reimbursement from personal injury settlements.  Our "anti-subrogation rules," which are insurance rules from the NC Department of Insurance, have many exceptions, however.  Medicaid, Medicare, the State Employee Health Plan, and Workers Compensation Insurance are the most common of the exceptions. These folks must be paid back if you get a recovery from your personal injury case.  The last exception is for self-funded health insurance plans which are exempted from state law because the federal law of ERISA pre-empts state laws.

ERISA is NOT a lien.  It is a contractual right of repayment which obligates the recipient of an employee health plan to repay the plan if a recovery is made from a third party (tort feasor). 

Stealth Plans or Health Plans?
It is not always so simple to determine if a Health Plan is actually self-funded.  What's worse, is that some non-self-funded Health Plans claim to be self-funded.  Thankfully, my friend in South Carolina, attorney and blogger Roy Harmon of Health Plan, has posted an excellent article on the various ways to determine if a health plan falls under ERISA and can claim a right of reimbursement.

Form 5500:  How do you read this thing?
Here is an excerpt from Roy's post about determining what a Form 5500 means:

Often offered as a solution, the inquiring as to the filing of Form 5500’s is a good starting point for determining whether a plan is a self-funded ERISA plan.

The plan participant (perhaps not the participant’s attorney, according to some cases) is entitled to request the most recent Form 5500 under 29 U.S.C. 1024(b)(4). While you wait for the plan administrator to send it (and you do want to ask the “plan administrator” (not the claims administrator), you can check and take a look at what is available there. For more information on plan reporting and disclosure requirements, the DOL has published a good resource in the form of a booklet.

The Form 5500 will have a section, Box 9, that indicates the plan funding arrangement. If the form says “general assets of the employer”, that suggests a self-funded plan. If it says “insurance”, its suggests a fully insured plan. (Fully insured plans may still be ERISA plans, but the preemptive force of ERISA Section 514 only applies with its full force and effect in the case of self-funded ERISA plans.)

But evaluation of the Form 5500 is not conclusive.

Click here to read Roy's ENTIRE post, full of great suggestions.

Roy has some great articles on his website. He generally covers all of the federal cases which address ERISA law, and does a good job of boiling down some complicated law into understandable tid-bits.  Of course, ERISA law is not exactly cut and dried, no matter how you look at it, so you really have to make your best guess, and when in doubt, ask a colleague.

-Chris Nichols
Nichols Law Firm Website

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