Articles

When you are injured by a third party, who gets the money?
You or your health insurance?
(Medical Reimbursement in a Personal Injury Case.)

By
John G. Breakfield
Coleman & Chambers, LLP

This article is intended for educational purposes only and is not intended to be, nor should it in any manner be construed to be, the giving of legal advice.

This article does not address Medicare or Medicaid reimbursement or other healthcare related liens or other issues of reimbursement or subrogation.

Why should I care about reimbursement?

You've paid your astronomical healthcare insurance premiums for years and after being involved in a car accident that was not your fault, your health insurance company sends you a letter saying that you have to pay them back for your healthcare costs from any proceeds that you or your attorney may recover from the Defendant. The health insurance company tells you that the law allows them to be 'reimbursed' for the costs that they spent on your healthcare and that any amount you receive from the Defendant (up to 100% of any settlement or jury award) is theirs, not yours.

(For example: if a driver with only $25,000.00 in insurance and no personal assets runs into you and injures you to the tune of $25,000.00 in medical expenses, your health insurance company could try to take all $25,000.00 of any settlement or jury award. In this example, even if you were left with $0.00 for your pain and suffering, the insurance company, under certain circumstances, could take all of the $25,000.00 recovery.)

You've got to be kidding me! Why?

Health insurance companies claim that due to the rising cost of healthcare that they must be able to be paid back if one of their insureds is injured and receives money from a responsible party. The politicians, at both the state and federal level, have chosen the insurance companies over injured people and have passed laws that allow insurance companies to get at the personal injury recovery before the injured party.

Unfortunately, if you are never injured due to an auto accident, the insurance company does not provide you with a refund for all the thousands of dollars in healthcare premiums that you have paid over your lifetime.

There are Two Major Types of Healthcare Reimbursement-
State and Federal (ERISA)

Health insurance generally falls into two general categories: those regulated by state law and those regulated by federal law. The injured party that is covered by a healthcare policy regulated by the State of Georgia, will generally have more rights regarding reimbursement than a person covered by a federal (ERISA) plan.

Georgia Law

If your health insurance is through an insurance company that is regulated by state law (as opposed to federal law) then reimbursement is regulated by Georgia Statute § 33-24-56.1, which reads in part:

the benefit provider for the person injured may require reimbursement from the injured party of benefits it has paid on account of the injury, up to the amount allocated to those categories of damages in the settlement documents or judgment, if:

1. The amount of the recovery exceeds the sum of all economic and noneconomic losses incurred as a result of the injury, exclusive of losses for which reimbursement may be sought under this Code section; and
2. The amount of the reimbursement claim is reduced by the pro rata amount of the attorney's fees and expenses of litigation incurred by the injured party in bringing the claim. (Emphasis added.)

In is extremely important to note that Georgia law establishes the public policy that an insurance company can only be reimbursed if the injured party is "made whole." Therefore, under Georgia law if you are not 'made whole' (as determined by a judge), then the insurance company cannot take away any portion of your jury award or settlement. (See Davis v. Kaiser Found. Health Plan of Ga., Inc., 271 Ga. 508 (1999).)

(For example: if you are injured to the tune of $50,000.00 total damages as determined by a judge, and there is only $25,000.00 that could be recovered from the Defendant, you have not been 'made whole' since your actual damages exceed the money you received as a settlement or award. Therefore, in this example, the health insurance company would not be entitled to receive any reimbursement from the injured party.)

Federal Law (ERISA)

Federal Law controls insurance policies that are created by and regulated under the Employee Retirement Income Security Act of 1974 or ERISA for short. Generally, an ERISA plan is an employer or group of employers that have a common fund to pay for medical expenses of their employees. The employers can actually run the fund, but usually hire insurance companies to run it for them. The ERISA plan for most purposes (except the notable reimbursement issue) acts very similar to traditional insurance.

Under federal law, recently upheld by the United States Supreme Court in Sereboff v. Mid Atl. Med. Servs., 126 S. Ct. 1869 (U.S. 2006), an ERISA insurance plan, if it has the proper language in its plan, is entitled to first priority over an injured party in regards a settlement or award. Unfortunately, if the plan's policy language is written pursuant to ERISA law, then ERISA law does not recognize that an injured party should be 'made whole' before the insurance company is allowed to take money from an injured party's settlement or jury award. Regardless of the hardship or the inequity, the ERISA plan is the first to be paid. (See Cagle v. Bruner, 112 F.3d 1510 (11th Cir. 1997).)

(For example: an injured party is involved in a tragic collision that paralyzes him or her, the Defendant has $500,000.00 in insurance and assets and the medical expenses are $500,000.00. Under ERISA, how much does the injured party get for being paralyzed and how much does the ERISA plan get? Well, if the ERISA plan has followed the law's requirements for the plan's language, they could take $500,000.00 and leave the injured party with nothing.)

What can be done?

It is easy to hire a car wreck lawyer that has a slick ad in the phonebook or hire your brother-in-law, but due to today's laws regarding health insurance reimbursement, it is crucial to have an attorney that understands both state and federal law; because if your attorney does not understand the law and the insurance company does, you could end up losing some or even all of your settlement or jury award.

The first thing that an experienced attorney should do is determine whether the client has state or ERISA regulated insurance. Next, the lawyer should find out whether the client wants to fight the insurance company on reimbursement or not. (This is always the client's decision.) If the client wants to try to maximize the percentage of recovery and has an ERISA plan, then the lawyer should look at the language of the ERISA plan. When looking at the plan, the attorney should make sure that the written language of the plan is actually in compliance with ERISA law.

(For example: The 11^th Circuit of the Federal Court of Appeals has recently ruled that if an insurance company does not have certain language in their written ERISA plan, then the insurance company would not be entitled to reimbursement from the injured party's settlement or jury award. (See Popowski v. Parrott, 461 F.3d 1367 (11th Cir. 2006).)

Conclusion

Being injured by a negligent person is hard enough, but it can be even harder if the insurance company takes all or part of your settlement or award. In the modern day world of personal injury law, it is not enough to know jury awards, judges and negligence, one must know about the pitfalls of health insurance reimbursement. If not, an injured party will be at the insurance company's mercy.

About the author: John Breakfield is an attorney with Coleman & Chambers, LLP, in Gainesville, Georgia. The law firm of Coleman & Chambers, LLP regularly handles matters regarding those injured by the negligence of others and advises its clients on reimbursement law. The firm has handled personal injury cases in numerous counties including: Hall County (Gainesville), White County (Cleveland), Lumpkin County (Dahlonega), Gwinnett County (Lawrenceville), Dawson County (Dawsonville), Habersham County (Demorest, Cornelia), all of Northeast Georgia, and throughout the State of Georgia.