Do I have to Repay my Health Insurance Company?

A common question is “Do I have to repay my health insurance company?” The answer to this question usually depends on the type of health insurance plan you have. Health insurance plans generally fall into one of two categories (1) plans regulated by state law, and (2) plans regulated by federal law (ERISA plans).

If your health insurance plan is regulated by state law, then reimbursement is governed by O.C.G.A. § 33-24-56.1, which provides that an insurer or other entity that has paid health care expenses, health care services, disability payments, lost wage payments, or any other benefits under a policy of insurance or contract with an individual or group 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.

The statute has been interpreted by the courts to mean that an insurer or other entity providing benefits must show that the injured person has been completely compensated for his/her injuries. This provision is known as the “Made Whole Doctrine” or the “Complete Compensation Rule.” In Thurman v. State Farm Mut. Auto. Ins. Co., 278 Ga. 162 (2004) the Georgia Supreme Court held that Georgia’s public policy is strongly supportive of the complete compensation rule and further explained that an insurer is prohibited from obtaining reimbursement for amounts paid under medical payments coverage unless and until the insured has been completely compensated for her loss.

If your plan is an ERISA plan, then federal law applies (ERISA is the Employee Retirement Income Security Act of 1974). Congress enacted this law in order to create uniform standards of conduct, responsibility and obligation for fiduciaries in employer-provided benefit plans, such as insurance funded retirement, health, life, accidental death and disability plans, and to provide appropriate remedies, sanctions and access to federal court for claimants. ERISA plans are a form of insurance sponsored by employers that fund a separate account to pay for their employees’ medical expenses. Most ERISA plans contain a reimbursement provision which permits the Plan to recover benefits from an injured person should the injured person ultimately recover any money from the negligent party.

Under a self funded ERISA plan, the Plan is entitled to reimbursement for any benefits advanced which are ultimately recovered from a third-party tortfeasor. Specifically, section 514(a) of ERISA (29 U.S.C.S 1144(a)), states that except as provided by 514(b), ERISA supersedes all state laws insofar as they may relate to any employee benefit plan. Section 514(b) contains a “saving clause” (29 U.S.C.S 1144(b)(2)(A)), which reserves to the states the power to enforce state laws regulating insurance, and a “deemer clause” (29 U.S.C.S 1144(b)(2)(B)), which provides that an employee benefit plan governed by ERISA shall not be deemed an insurance company, an insurer, or engaged in the business of insurance for the purposes of any state law purporting to regulate insurance companies or insurance contracts. FMC Corp. v. Holliday, 498 U.S. 52 (1990). The “deemer clause” exempts self-funded ERISA plans from state laws regulating insurance. Id. at 61 (holding that we read the deemer clause to exempt self-funded ERISA plans from state laws that “regulate insurance” within the meaning of the saving clause). The deemer clause relieves plans from state laws “purporting to regulate insurance.” As a result, self-funded ERISA plans are exempt from state regulation, including anti-subrogation laws, insofar as that regulation relates to the plans. Id. Therefore, most self-funded ERISA plans are exempt from state regulation, including Georgia’s anti-subrogation laws. Accordingly, if the Plan’s policy language is written properly it can disavow the Complete Compensation Rule recognized by Georgia courts. See Cagle v. Bruner, 112 F.3d 1510 (11th Cir. 1997). However, if the plan language is not precisely drafted then the plan may not be entitled to reimbursement. SeePopowski v. Parrott, 461 F.3d 1367 (11th Cir. 2006).

In sum, this area of the law is tricky and must not be overlooked when exploring settlement of your claim. Prior to settling your case, or negotiating with your health insurance company, it is important to have attorneys experienced in ERISA and medical reimbursement in order to maximize your recovery.