Why Employer Health Plan Reimbursement Rules Differ
Employer health plan reimbursement rules differ mainly because some plans buy insurance from a regulated company while others pay claims from the employer’s own funds. Insured plans usually follow California’s lien limits. Self funded plans governed by the federal ERISA law often follow their own written terms instead. So the first question after any repayment demand is what kind of plan paid your bills, because that answer decides which rules apply.
Insured Plans and California Limits
When an employer buys a group policy from a California regulated insurer or health plan, state law often applies to repayment. Civil Code section 3040 caps those liens. In general, the plan cannot claim more than it actually paid, and the claim shrinks for attorney fees, costs and comparative fault. The statute also sets an outside cap of one third of the recovery when a lawyer represents the injured person.
Those limits can make a large difference in the net recovery. For background, see California subrogation law.
Self Funded ERISA Plans
Many large employers fund their own health plans and use an insurer only to process claims. Those plans fall under the federal Employee Retirement Income Security Act, known as ERISA. In FMC Corp. v.
Holliday, the United States Supreme Court held that ERISA preempts a state anti subrogation law as applied to a self funded plan. The opinion is on the Legal Information Institute site.
As a result, state limits like Civil Code section 3040 may not reach a self funded plan. Instead, the plan’s own documents largely control what it can recover.
Plan Terms Govern Employer Health Plan Reimbursement
In a 2013 case brought by an airline’s health plan against an employee named McCutchen, the Supreme Court held that when a self funded plan sues to enforce its reimbursement terms, those terms govern. General fairness doctrines, such as the common fund rule, could not override clear contract language. The decision appears on the Legal Information Institute site.
So reading the plan document becomes essential. Some plans claim full repayment from the first dollar of any recovery. Others reduce their claim for fees or follow other rules. The language makes the difference.
How to Tell Which Kind of Plan You Have
Your insurance card may not say whether the plan is self funded. Ask the plan administrator or your employer’s benefits office. Request the summary plan description and the full plan document, including any reimbursement section.
- Is the plan insured or self funded?
- Which document contains the reimbursement terms?
- Does the plan reduce its claim for attorney fees?
- What amount does the plan say it paid for crash care?
Write down the answers and keep copies of every document. Then share them with your lawyer before any settlement talks.
Checking the Amount Claimed
Plans sometimes include unrelated charges in a reimbursement demand. For example, a routine physical or a prescription for a chronic condition may appear on the list. Compare each charge with your treatment for the crash. Then dispute any unrelated items in writing.
Negotiating Employer Health Plan Reimbursement
Even when plan terms favor the plan, many plans negotiate. A plan may accept less when the recovery is small, when policy limits are low or when the injured person faces large losses. So ask for a reduction in writing and explain the reasons. Include a summary of the settlement, the fees and the other liens.
Ask your plan which legal framework applies to it, and get the answer in writing.
Timing and Settlement
Resolve the plan’s claim before or at the time of settlement. A release often requires you to pay liens from the proceeds. If the plan’s claim remains open, some funds may stay in trust until the plan and the injured person resolve it. For more on bills during a claim, see medical bills pending settlement.
Employer Health Plan Reimbursement and Other Liens
A plan’s claim rarely stands alone. Hospitals, Medi Cal, Medicare and treating providers may also seek payment. Each follows its own rules, and the order of payment can matter when the recovery is small.
So list every claim, the amount each one asserts and the rule that governs it. That list helps your lawyer negotiate reductions across the board instead of one at a time.
Also keep in mind that the plan may continue paying for crash related care after the settlement talks begin. Ask for an updated statement shortly before the case resolves, because a figure from months earlier may be out of date.
Questions for a Lawyer
Ask whether the lawyer has handled self funded plan claims before. Then ask how the lawyer approaches negotiations with plan administrators. Those answers show how the lawyer will handle one of the largest deductions from many settlements.
Net Recovery and Employer Health Plan Reimbursement
Two people with the same settlement can keep very different amounts depending on their plans. One may have an insured plan subject to state caps. The other may have a self funded plan claiming full repayment. Understanding which applies helps you plan and negotiate, and it avoids surprises when the money arrives.
This article is general information, not legal advice. Laws change and every situation is different.