Paying Back Health Insurance Company

Lawyers and attorneys handling insurance claims in the Dallas and Fort Worth areas need to be able to discuss subrogation issues with clients who have been injured by third parties. Bloomberg Businessweek published an article on April 7, 2015, that discusses this issue. It is titled, “How An Insurer Is Taking Money From The Fan Beaten At Dodger Stadium.” Here is some of what it tells us.
First he was assaulted for wearing the wrong team’s clothes. Then he was sucker-punched by the insurance system.
Four years ago, Bryan Stow was a strapping paramedic who spent his days off biking with his son and daughter. That was before March 31, 2011, when he and three friends made the mistake of wearing San Francisco Giants garb to an Opening Day game against the rival Los Angeles Dodgers at Dodger Stadium. They were harassed and threatened in the stands. Afterwards, two Dodgers fans beat Stow so savagely in a parking lot that doctors had to induce a coma to save him. He was hospitalized for seven months.
The damage to Stow, 46, remains unmistakable. A scar runs from the left side of his forehead to the back of his head. On the right side, a shunt used to drain fluid from his brain protrudes from his skull. Special stockings on his legs prevent life-threatening blood clots.
The beating of Stow drew national attention to sports hooliganism. It’s also brought to light a virtually unknown aspect of the legal system that cuts compensation to victims. In effect, Stow was sucker-punched twice: first by his assailant and then by his health insurer.
Although a Los Angeles Superior Court jury awarded Stow $18 million from the Dodgers and his assailants last year, he has yet to receive any money. And, in a bizarre twist, the Dodgers’ liability insurer, ACE Property and Casualty Insurance Company, stands to net $1.6 million from a side deal in the case.
It’s all because Stow’s health insurer is entitled to a huge slice of the settlement, even before Stow is paid. A growing body of federal law, including a recent U.S. Supreme Court case, gives insurers power to recoup medical costs caused by a third party–in the face of state laws that specifically prohibit it. “This is what people pay premiums for,” says Stow’s ex-wife, Jacqueline Kain. “To worry about some insurance company taking what is his is absurd.”
The concept is known as subrogation. The modern version dates back to the American Revolution and was applied in areas such as property insurance. An insurer, for instance, might seek to be repaid by the maker of a faulty furnace that caused a fire in a building the company covered. In recent years, subrogation has mushroomed into a multibillion-dollar source of offsetting costs for private health insurers as well as Medicare and Medicaid. Medicare reaped nearly $2.5 billion last year, aided by a 2007 law that requires the federal insurer for the elderly to be notified of any legal settlements paid to its beneficiaries so it can subrogate the funds.
Such medical liens have reduced and delayed compensation in several cases–from the thousands of patients who suffered heart attacks or strokes from diabetes drug Avandia to the 1,000 Montana residents sickened by asbestos from a mine. It is extremely frustrating for people who are sick, or dying, or who have loved ones who have died and are desperately in need of money.
The liens have spawned companies and law firms that identify cases and, representing the interests of medical insurers, pursue patients who have received court settlements. A unit of Xerox recovered more than $1 billion for health-care clients in a recent three year period. Optum, a company owned by insurance giant UnitedHealth Group, is a major player.
Insurers and employers say getting back money in these cases helps lower premiums for all members of a group plan. Research shows the recovered money does little to reduce insurance rates while increasing executive pay and shareholder payouts.
All but two states either ban subrogation outright or limit how much insurers can collect. Unfortunately, many employers provide health insurance as an employee benefit under the Employment Retirement Income Security Act, or ERISA, which is a federal law. Congress specifically designed ERISA to supersede any state statutes related to employee benefit plans. More than 90 percent of workers with medical coverage at the largest U.S. corporations are insured this way, according to the Kaiser Family Foundation. Hailed at its passage in 1974 for safeguarding employees’ pension plans, ERISA now helps deny or reduce compensation to workers injured through someone else’s negligence.
Stow received his health insurance through an ERISA plan. So did James McCutchen, a US Airways mechanic badly injured in a highway wreck in 2007. When US Airways demanded repayment of $66,866 it spent on his medical treatment–a figure slightly exceeding the $66,000 he netted in a settlement after paying his lawyer–McCutchen refused to pay. He argued that the US Airways lien was unfair because he had not been fully compensated for his injuries. A federal appeals court agreed, calling it a “windfall” for the airline.
In 2013 the U.S. Supreme Court sided with US Airways, ruling that as long as the health plan’s contract with employees specifies that it can be reimbursed for medical costs in these situations, it has a legal right to collect. Most employees have no idea these provisions exist.
Stow and his family certainly didn’t. As a paramedic for American Medical Response, a subsidiary of Envision Healthcare, Stow dutifully paid a $334 monthly premium for the insurance coverage that was a perk of the job. After the attack, his family initially didn’t worry about the cost of his care, knowing he was insured.
Then Envision demanded repayment of the more than $3.4 million it paid for Bryan’s treatment. Bryan’s mother, Ann, couldn’t believe it. She asked her attorneys how the insurer “could get away with this,” she says. “The thing is, it is not illegal.”
The Stows had another surprise when they sued the Dodgers and the two assailants. During the civil trial last year, Envision quietly assigned its rights to the $3.4 million to the Dodgers’ liability insurer, ACE Casualty Insurance and Property, at the discounted price of $1.8 million.
The jury ordered the Dodgers to pay $13.9 million. The Dodgers’ insurance company, ACE, then sent a check to Stow’s lawyer deducting $3.4 million for the medical lien that they purchased at a discount. The maneuver would effectively allow the team’s insurer to realize $1.6 million from its lien deal.
Stow’s legal team expects Ace to file a lawsuit to collect the $3.4 million. Given the Supreme Court decision, Stow faces an uphill fight. The problem now is the law is pretty clear with the McCutchen case. The options are severely limited.
Stow’s attackers are responsible for the other $4 million of the $18 million judgment, but no one expects they will ever pay.
Stow also owes his lawyers $3.6 million. And San Francisco General Hospital, where Stow was transferred from Los Angeles, has filed its own lien of $1.2 million for care not reimbursed by his health insurer.
Unless he wins his long-shot effort to nullify or reduce the multimillion-dollar insurance lien, Stow will be left with $5.8 million, far short of what he’s likely to need for a lifetime of care. An expert hired by the Stows pegged his future medical costs and rehabilitation at more than $30 million.
Envision says that “fortunately” its plan provided Stow with medical benefits. It didn’t comment on the sale of the lien to ACE. The Dodgers’ insurer said in a statement that “acquiring medical liens is common practice that is regulated by the health-care industry. By acquiring a lien, lien purchasers also acquire the risk of default on the lien.”