Liens on Your Personal Injury Settlement: Self-Funded ERISA Plans

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Liens on Your Personal Injury Settlement: Self-Funded ERISA Plans

In Missouri and Kansas, ERISA liens are becoming a more common issue for people injured due to another person’s negligence.  While ordinarily health insurance companies in Missouri and Kansas are prohibited from being reimbursed out of a settlement or judgment, Self-Funded ERISA Plans have a right to be reimbursed if the Plan language indicates such a right. 


So What is an ERISA Lien?


Only Self-Funded ERISA Plans, and not plans funded through the purchase of insurance coverage, are entitled to be reimbursed from a settlement.  ERISA, the Employee Retirement Income Security Act of 1974, was originally enacted to protect employees, but over time it has been construed by the courts to protect employers.  A Plan’s right to subrogation or to be reimbursed from a settlement is one such example. When an employer agrees to provide an individual with health insurance, the employer is receiving the benefit of the employee’s years of service and even premiums paid by the employee for that insurance.  Thus, an employer has already been compensated for the insurance benefits provided by a self-funded plan. Allowing the plan then to be also reimbursed from an injured person’s settlement does more harm to the injured person and allows the plan double recovery. And a Self-Funded ERISA Plan’s rights are absolute based on decisions from the United States Supreme Court.  They do not have to pay any portion of the costs of pursuing a settlement or the attorney’s fees. So in essence, when an injured person hires an attorney to pursue a personal injury claim, that person is paying an attorney to help recover their damages. When the case settles, the ERISA Plan is reimbursed without having to pay any portion of the costs to collect or an attorney’s fee to collect the settlement.  The Plan has no obligation to pay for any portion of reimbursement.


Why ERISA Liens Are Bad News for Injured People 


Consider a recent case involving Debbie Shank and her employer, Wal-Mart. According to CNN, Shank got into a trucking accident while she was covered by Wal-Mart’s employee health and benefits plan, which the employer pays directly.  Debbie had been a shelf-stocker at Wal-Mart. For Shank’s post-accident health care, the company paid $417,000. Debbie’s injuries were severe—she suffered brain damage and was wheelchair bound and had to live in a nursing home.  The mother of three ultimately received a settlement for her injuries. The net amount of the settlement that went to Ms. Shank after expenses and fees was approximately $417,000.

Wal-Mart, which reported 90 billion in net sales in the third quarter of 2007, then sued Debbie, alleging it had a right, based on the fine print in its Plan language, to be paid the entire net amount to Debbie of approximately $417,000 for reimbursement of its payments for Debbie’s healthcare.  It also sought recovery of its legal fees. Wal-Mart won in federal court. It also won after appeal, and Supreme Court refused to hear the case, thus affirming the ruling from the court of appeals. As news broke about Wal-Mart’s conduct, Daphne Moore, Walmart’s corporate communications director, described it as “very sad case” and said, “We understand that people will naturally have an emotional and sympathetic reaction.”

Wal-Mart also stated, the reality is that its health plan must protect its assets so that it can pay the future claims of other associates and their family members.”

Eventually, however, this case became a “PR nightmare” for Wal-Mart.  While on MSNBC, Keith Olberman vilified the retail giant and called Walmart CEO Lee Scott “the worst person in the world.”  He also noted that a week after Walmart beat Deborah Shank in court she lost her 18-year-old son in Iraq. Eventually, in the fallout, Wal-Mart relented and announced in April 2008 that Debbie could keep the money.  It also announced that it would no longer seek reimbursement from settlements from various categories of catastrophic injury.


If You Have Been Injured, Talk to Your Personal Injury Attorney 


If Congress and our Courts put injured people first, Self-Funded ERISA Plans would protect injured people and prohibit a Plan’s ability to be reimbursed a second time for paying for their injured employee’s healthcare expenses.  Unfortunately, the insurance industry has worked very hard to minimize the amounts injured people will receive, and there is no indication that the law with respect to ERISA liens will change any time soon. However, an experienced personal injury attorney will still work to protect you.

For example, ERISA Plans and other health plans will often assert a lien on a settlement when they have no right to do so.  An excellent personal injury attorney will always ensure that an ERISA Plan has a right to be reimbursed—that is, to ensure that the Plan is truly “self-funded”.  Further, an experienced personal injury attorney will obtain the Plan documents and review them, because the Plan’s right to be reimbursed is governed by the fine print in the Plan’s language.  Unfortunately, because a Plan’s right to reimbursement can be absolute, there are cases when a Plan may assert a right to an entire settlement, leaving the employee with nothing. In these circumstances, an experienced attorney will negotiate and ERISA liens before settling a case.

If you have been injured because of another person’s negligence, or if you want to talk with an attorney about making sure any liens are handled appropriately, call Aaron House today for a free consultation at 816-875-4260.

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