Wednesday, October 27, 2010

What Is Medicare's Right To Recovery When Involving MICRA

I understand that MICRA did away with the subrogation rights of private health insurers, but does Medicare maintain a right of recovery in the event of a settlement of a medical malpractice case for bills that it has paid.

California Attorney

Thank you for the question. The answer to your question is that yes Medicare maintains its right to recovery despite MICRA. First, MICRA is a state law. Second, arguably payments made by Medicare fall outside the scope of collateral payments described in MICRA.

I would also caution not to disregard all private health insurer claims in California. It is important to remember that a self-funded ERISA would contest such an argument based on the fact that a self-funded ERISA is deemed not to be insurance. See FMC Corp. v. Holiday, 498 US 52 (1990). Thus this state law would not be saved from preemption. However, I would completely agree that an individual insurance policy or an insured ERISA plan would be barred from seeking recovery under MICRA.

Michael D. Russell, Esq.

Wednesday, October 13, 2010

Self-Funded Insurance Form 550

ABC Company Supermarkets furnished health coverage to my client, an ABC Company employee, was injured in a Motor Vehicle Accident. ABC Company is claiming to be self-funded and has asserted a lien against my client's settlement proceeds for 100%. Form 5500 line 9a (plan funding arrangement) is marked insurance and general assets of the sponsor. Schedule A line 7 is marked health, HMO and prescription drug, line 8 is marked nothing. Line 9 shows $1,396,016 for (a) Total Premiums or subscription charges paid to carrier and (b) is marked N/A. Does this indicate ABC Company is partially self funded, and if so will state law apply (Florida) to reduce the lien to less than 100%?

Thank you for the question. Before getting to the Form 5500 question I want to touch upon the plan language of the ABC Company Plan. All SPDs should contain basic information about the plan including funding status. While not always conclusive (or accurate) it is the best place to start. Assuming the SPD states the plan is self-funded the next place to go is the Form 5500 and the question you pose below.

As line 9a indicates both insurance and general assets we can conclude that welfare plan as a whole has some aspects which are self-funded and others which are insured. This may mean that some benefits such as dental, vision, and life insurance are provided through insurance agreements while the medical portion is provided through employer assets. It may also mean that some employees receive medical coverage through insurance while others receive self-funded medicals (largely due to geographical issues). The next step is to examine the Schedule A(s) which you have correctly done.

For each insurance arrangement under the Plan there will be a Schedule A. Under the circumstances of your question it would appear that some medical (health) benefits are provided through insurance. One scenario could be that a portion of employees receive insured health benefits. Compare the number of plan participants on the main form (line 6) with the number of people covered under the HMO on the Schedule A (line 1(e)). If a large number of participants are represented by the Schedule A(s) you may have a good argument that the plan is insured. Another scenario could be the use of a stop loss policy.

If the Plan benefits provided were both partially funded and partially insured we are dealing with a "stop-loss" coverage situation. These situations arise when an employer or Plan purchases insurance coverage intended to reimburse it for higher or catastrophic losses. In the case of a higher loss, a self-funded Plan would pay the entire loss but would be reimbursed for any amount above where the insurance policy (between the plan and carrier) took effect (known as the "attachment point"). The use of "stop-loss" insurance does not change a self-funded plan into an insured plan. Bill Gray Enter., Inc. Emp. Health & Welfare Plan v. Gourley, 248 F.3d 206 (3rd Cir. 2001), American Medical Security, Inc. v. Bartlett, 111 F.3d 358 (4th Cir. 1997). Courts have reasoned that stop loss arrangements do not change the fact that the ultimate liability to plan participants remains with the Plan.

However, there is one potential exception. In some cases an attachment point could be set very low and the Plan is attempting to function as and enjoy the benefits of a self-funded plan under ERISA when in fact it is really an insured plan. Such examples would include a specific attachment point of $500 (individual claim) or $25,000 for an aggregate attachment point (total benefits paid for all participants). In such cases, courts could look to the substance of the Plan rather than its alleged form. See Brown v. Granatelli, 897 F.2d 1351, 1355 (5th Cir. 1990). In determining whether a stop-loss Plan is truly self-funded or merely illusory, a court will look to the loss experience and how often the stop-loss coverage has applied. Thus if there is a low attachment point then it could be argued that the plan functions as insurance.

As a last resort you could request that the plan sponsor produce an affidavit that states that the medical plan is self-funded and the benefits provided to your particular client came from the assets of the employer.

I hope you found this response helpful.
Michael Russell, Esq.

Tuesday, October 12, 2010

Medicare Advantage Plan Language

This is a follow-up question seeking clarification of a response Michael D. Russell of your office was kind enough to provide on August 30, 2010: Client is enrolled in a Medicare Advantage / Medicare Replacement Plan. Subrogation / Reimbursement is sought for all claim payments made by the private insurer. Is it fair then to say that pursuant to, the private insurer only retains a statutory right to reimbursement of those claims actually paid by Medicare? If so, how is one able to distinguish between those claims actually paid by Medicare and those paid by the private insurer?

My concern is that private insurers (and their subrogation contractors) are wrongfully relying on the federal statute as a basis for seeking reimbursement of claims that are not subject to subrogation / reimbursement in New York.

New York Attorney

Thank you for the question. If the plan is truly a Medicare Advantage Plan then the private carrier is responsible for making all payments. A Medicare entitled individual chooses to opt into a Medicare Advantage plan. Private insurance carriers, who participate in the MA program, contract with CMS to administer Medicare benefits. The Federal Government pays for MA coverage on a monthly basis (42 USC 1395w-23) and then annually determines the "per capita" rates for these payments (42 USC 1395mm). However Medicare does not directly make payment for a person's care. Thus a person on MA does not receive any payments from Medicare. NOTE THAT THIS IS NOT THE CASE WITH SUPPLEMENTAL POLICIES. SUPPLEMENTAL POLICIES ACT IN CONCERT WITH MEDICARE AND ARE NOTHING MORE THAN INSURANCE POLICIES WHOSE RIGHT TO REIMBURSEMENT WOULD BE BARRED BY STATE LAW.

The only exception where both the private carrier and Medicare would make payments is a situation where an individual was on Medicare for some period and then opted into a Medicare Advantage program. In such a case be sure that you compare the payments made by both entities as we have seen private carriers attempt to claim identical payments.

So can NY GOL Section 5-335 bar a MA plan's right to reimbursement? Well it depends on the authority cited to substantiate their right. If the MA plan merely points to contractual language then arguably their claim would be barred. However if the basis for their claim is 42 CFR 422.108(f) then arguably they are asserting a statutory right. The overall issue of MA plans and the applicability of state law is hotly contested and I would expect some case law on the matter in the near future.

Michael D. Russell, Esq.