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An Example of an ERISA Reimbursement Travesty
Posted by: Jill Bollwerk
January 17, 2008
Topic: ERISA Reimbursement Claims
You are injured in an auto accident because some jerk rear-ended you. You break your leg. You get emergency treatment and you see an orthopedic surgeon who puts a pin in your femur. You have physical therapy and miss a month of work. Your health insurance, which is provided to you by your employer, picks up your bills. You decide to sue the idiot who rear-ended you. The man only has $25,000 in auto liability insurance, and his insurance company offers to pay you the policy limits of $25,000. However, this amount doesn't even cover your medical expenses. But, what can you do.....the man who hit you lives in an apartment, has a beat-up old car and is unemployed, so suing him for more than his insurance policy is pointless. You decide to settle with the insurance company for the $25,000.
A month after you settle, you get a letter from your health insurance company, telling you that they are demanding that you repay them for the medical expenses they paid on your behalf. They paid $30,000, but because you only received $25,000, they are demanding $25,000. You think to yourself--this is crazy! I pay for part of my health insurance premiums every month--why do they get to take everything I received from the responsible person? Don't I get to keep my lost wages? Don't I get something for my pain and suffering? Don't they have to pay my attorney? The answer to these questions just might be "no!"
Yes, it seems completely unfair, but the fact of the matter is this. If your employer provides insurance coverage to you as a benefit, that health insurance plan is likely to be a plan set up under a federal law known commonly as "ERISA." Under this federal law, it is permissible for a health insurance carrier to put language in their plan allowing them to seek reimbursement from you for amounts they paid on your behalf due to someone else's negligence. Seems unfair, but that's the law.
A colleague of mine alerted me to a news story that will pull at your heartstrings and will show you just how devastating the effects of an ERISA repayment claim can be on someone who has been injured due to the fault of another person. The case is out of Minnesota. Take a look for yourself, the sad story of Tom Cary.
