Wall Street Journal
There is a recent newsworthy item that I wish to discuss, as it is pertinent to our industry. The November 20, 2007 Wall Street Journal featured an extremely negative cover story, relating to the self-insured industry’s subrogation activities under ERISA. These types of prominent news stories do nothing for the self-insured industry except motivate the public to change current ERISA legislation. For those of you who do not know about this case, the story covers a woman’s collision with a semi-trailer truck seven years ago, leaving the 52-year-old Deborah Shank permanently brain-damaged and in a wheelchair. Her husband, Jim, received a $700,000 accident settlement from the trucking company involved. After legal fees and other expenses, the remaining $417,000 was put in a special trust to be used for Mrs. Shank’s care. The bottom line is that every penny went to her former employer, Wal-Mart Stores Inc., based on their subrogation litigation. The retail giant’s health plan sued the Shanks for the $470,000 it had spent on her medical care. A federal judge ruled last year in Wal-Mart’s favor, backed by an appeals-court decision in August. Now, her family has to rely on Medicaid and social-security payments to keep up her round-the-clock care. This case made the cover of the Journal, and will no doubt bring subrogation to the public’s attention, cast in a negative light. Did it really have to come to this? While I can understand the reasoning behind the Plan’s decision to litigate, often times I wonder whether people realize what this type of case can do to our industry. Could the Plan have agreed to a portion of the settlement funds? The Plan clearly had the opportunity to do so. The story went on to add that Ms. Shank’s attorney wanted to negotiate a compromise, but was told the health plan wanted to proceed with the lawsuit; the Plan wanted every single penny reimbursed. The attorney stated in the article, “We’re not contending that Wal-Mart isn’t entitled to a payment. We’re saying they’re entitled to one based on equity.”
The point I am trying to convey is that not every decision relating to subrogation rights should go to court. There is a common saying among attorneys that “bad facts make bad law.” Plans have to assess the impact these types of cases have on the industry as a whole. There is no question that the publicity surrounding this case will only eclipse the positive results subrogation can bring to the self-insured industry. The patient’s attorney is attempting to appeal this decision to the Supreme Court. What effect will this publicity, and negative public opinion, have on that?
Going back to my previous example regarding the need for a signed subrogation agreement in every situation. Imagine if that type of case made it to the front page of a newspaper. What would the reaction be? These are the types of stories that make legislators wake up and try to change law. Nobody hears about the positives of being self-funded or that subrogation saves billions in health care costs nationwide, allowing employers to offer health insurance benefits to employees that they otherwise couldn’t afford.
In situations where there is not enough money to go around, it is important to think about the ramifications of a certain course of action, and to ensure that the overall goals are met by the administrator – to protect its client plans, offer superior service, reasonable pricing, and to ensure a positive future for the self-insured industry. These stories only reinforce the arguments of those who want to have universal healthcare and further erode the limited protections we currently have under ERISA.
I am currently in this same situation. I was in an automobile accident where I was disabled. I have $40,000 worth of medical bills. The person who hit me only had the state minimum insurance of $25,000. We had to sue our own automobile insurer for our underinsured coverage. We did win the lawsuit. My question is, can our insurance company only collect from the $25,000 amount, or can they also go after the small judgment we won from our auto insurance? Like the lady mentioned above, we very likely will come out of this with nothing. I can no longer work due to my disabilities, yet I am unable to get SSI disability payments (because I am still breathing on my own, apparently).
We, like the lady above, are willing to be reasonable with the insurance company. Can individual companies choose to be reasonable, or does ERISA force them, by law, to collect the entire amount?
Thanks for the idea of publishing this in some way. I truly believe, like many other laws, that this has been abused by companies who can use it to harm their employees, and make an already terrible situation even worse.
If I had known then what I know now, I would NEVER have gotten an attorney. Everybody has gotten paid but us, and I am the one who will suffer my entire life from this accident.
If enough people find out about this inequity, nobody will bother collecting from insurance companies for accidents. They will also find there’s no reason to have high-cost insurance. You can’t get it when you need it. You have to sue them in civil court to get what you’ve paid for your whole life, and the insurance companies win 75% if the time if it does go to court.
Lawyers will not be needed, and self-insured companies will suffer from their own greed.