Bogus subrogation claims are a fact of life in New York. The out-of-state third-party administrators of group health plans have no knowledge of New York’s anti-subrogation law. Most third-party administrators send form letters seeking payment for subrogation claims and completely disregard New York’s anti-subrogation law.
Most personal injury lawyers are too busy to fight the bogus subrogation claims and try to settle for pennies on the dollar. This is a BIG MISTAKE! With a single very rare exception, the group health plans have no legal basis for a subrogation claim and they shouldn’t recover a penny.
The Anti-Subrogation Law in New York
General Obligations Law section 5-335, entitled “Limitation of reimbursement and subrogation claims in personal injury and wrongful death claims”, states:
When a person settles a claim, whether in litigation or otherwise, against one or more persons for personal injuries, medical, dental or podiatric malpractice, or wrongful death, it shall be conclusively presumed that the settlement does not include any compensation for the cost of health care services, loss of earnings or other economic loss to the extent those losses or expenses have been or are obligated to be paid or reimbursed by an insurer.
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 against any such settling person or any other party to such settlement, with respect to those losses or expenses that have been or are obligated to be paid or reimbursed by said insurer.
Only “self-funded” group health plans are exempt from New York’s anti-subrogation law. 99% of group health plans are “insured” and pay premiums to an insurance carrier to provide the health insurance coverage for their employees. For the companies with an “insured” group health plan, New York’s anti-subrogation law applies and the company and its third-party administrator (TPA) cannot seek reimbursement for medical expenses from a personal injury settlement.
Unlike an “insured” group health plan, when a company directly pays for the expense of the health care of its employees, it is a “self-funded” health plan and is exempt from New York’s anti-subrogation law. With a self-funded health plan, the company does not pay insurance premiums and there is no insurance carrier; instead, the company acts, in essence, as the insurer by directly paying for medical expenses. A “self-funded” group health plan must be classified as such on the company’s tax return (form 5500).
Third-party administrators (sorry Rawlings) will seek to avoid New York’s anti-subrogation law by sending form letters to personal injury lawyers demanding reimbursement for medical expenses. In virtually all subrogation claims in New York, the claims of the third-party administrators are bogus and have no basis in law.
The Process for Defeating Bogus Subrogation Claims
The first step for defeating the bogus subrogation claims is to send a letter via certified mail demanding documentation of the company’s “self-funded” status (our letter is set forth below). 9 times out of 10 the third-party administrator will not respond to your letter
If there is no response from the third-party administrator, you should follow up with a letter advising the TPA that you presume they have no intention of seeking recovery based upon their failure to respond to your letter and accordingly, you will release the settlement funds to your client.
Before releasing the settlement funds, make sure you advise your client in writing that:
- A subrogation claim was asserted against the settlement proceeds,
- What you did to determine whether the claim was valid, and
- Your opinion regarding the validity of the subrogation claim.
Make sure your client is aware that a claim may still be made against her personal injury recovery and if a claim is brought, you will be defend her against the claim. Remember, your job is not simply to get a great settlement. It is your responsibility to fight bogus subrogation claims and liens in order to protect your client’s money.
Our Letter to Third-Party Administrators re: Subrogation Claims
VIA CERTIFIED MAIL
Dear Mr. Jones:
Our firm represents Ms. Smith in an action which is pending in the United States District Court for the Northern District of New York.
You have asserted a right to recover for medical expenses paid on behalf of the health plan referred to above.
As you are aware, our firm does not represent your interests in any manner, nor do we have the authority to act on your behalf.
If you are asserting a claim for reimbursement on behalf of an ERISA-governed health plan against our client’s recovery, as a preliminary matter in order to determine the validity of any asserted claim, and pursuant to 29 U.S.C. section 1024(b)(4), provide us with copies of the following documentation within thirty (30) days:
- A certified copy of the complete Plan Document for the Health Plan;
- Any document amending, supplementing, or otherwise modifying the Plan Document;
- Certified copies of any Summary Plan Description and employee benefits booklet in effect at the time of injury, and all such documents issued subsequently during any year in which benefits were paid to, or on behalf, of the claimant;
- Any SPD Wrap Document in effect at the time of the injury, and all such documents issued subsequently during any year in which benefits were paid to, or on behalf, of the claimant;
- Complete Bargaining Agreement, Trust Agreement, Contract or other instrument under which the Health Plan is established, together with any documents amending, supplementing, or otherwise modifying same;
- Any Trust Agreement or other document establishing the funding for the Plan;
- Certified copies of the Plan’s Annual Return/Report (IRS/DOL Form 5500), including all attached Financial Schedules, for the year including the date of injury and all subsequent years in which benefits were paid to, or on behalf, of the claimant;
- The complete Administrative Services Only (ASO) Agreement with any Third-Party Administrator (TPA) for the Plan, including claims processing, funding and reimbursement procedures;
- An affidavit from the Plan Administrator attesting to self-funded status of the Plan;
- A complete detailed statement of the benefits paid to, or on behalf, of the claimant; and
- Names and addresses of all payees of medical bills.
You are reminded that, pursuant to 29 U.S.C. section 1132, failure to supply the above requested documents and information within thirty (30) days from the date of this letter may subject you to a penalty of $100 per day and other costs, including attorney’s fees.
If we do not receive the materials listed above within forty-five (45) days of the date of this letter, we will presume that the Plan is not a self-funded employee welfare plan and withdraws its ERISA-governed health plan reimbursement claim.
Very truly yours,
John H. Fisher, P.C.
John H. Fisher