:: Refund Requests Prove Shortest Route To Group Health Plan Reimbursement

Plaintiff relies on a provision titled, “Third-Party Liability (Subrogation)” but Premera is not asserting subrogation rights. Premera might have asserted subrogation rights if Allied had not paid the PIP benefit, but Allied did so. Nor did Premera assert subrogation rights when it sought reimbursement from the providers because those providers were not liable to plaintiff.

Cooper v. Premera Blue Cross, Slip Copy, 2008 WL 2180148 (W.D.Wash.) (May 23, 2008)

This district court opinion illustrates a risk often overlooked by participants when engaging in disputes over their benefit plan’s claims for reimbursement from other insurance coverages. In this case, the group health plan simply recouped the amount in dispute by obtaining refunds from the health care providers previously paid for the plaintiff’s medical care.

The Facts

After suffering injuries in an accident involving an all-terrain vehicle (driven by a third party), the plaintiff applied for benefits under a Personal Injury Protection (“PIP”) coverage through Allied Insurance (“Allied”).

Ultimately, Plaintiff received $10,000 under the Allied PIP coverage and $4,200 for lost wages. The Plaintiff also received $50,000 in UM benefits under the Allied policy.

Plaintiff’s employer provided him with health insurance benefits through Premera Blue Cross. Premera paid plaintiff’s medical providers, but requested reimbursement from the Plaintiff for the amount of PIP coverage, on the basis that PIP “is an exclusion on this member’s plan.”

When the parties were unable to settle the dispute, Premera obtained reimbursements totaling $10,000 from plaintiff’s providers.

Subrogation Provision Irrelevant . . .

The plaintiff argued to the district court that the plan language failed to reach PIP coverage. The court rejected that argument as beside the point, stating:

Plaintiff relies on a provision titled, “Third-Party Liability (Subrogation)” but Premera is not asserting subrogation rights. Premera might have asserted subrogation rights if Allied had not paid the PIP benefit, but Allied did so.

Nor did Premera assert subrogation rights when it sought reimbursement from the providers because those providers were not liable to plaintiff. See, e.g., Barnes v. Indep. Auto. Dealers Ass’n Health & Benefit Plan, 64 F.3d 1389, 1392 (9th Cir.1995) (explaining that subrogation “is the insurer’s right to be put in the position of the insured, in order to recover from third parties who are legally responsible to the inured for a loss paid by the insurer”).

But The Language Was Adequate In Any Event

Even if Premera had asserted subrogation rights, observed the court, “the subrogation provision in the Plan permits it to recover under these circumstances:

‘To the fullest extent permitted by law, we’re entitled to the proceeds of any settlement or judgment that results in a recovery from a third party, up the amount of benefits paid by us for the condition.’ ”

Make Whole Doctrine Inapplicable

The court took some time with plaintiff’s arguments that reimbursement should not be permitted before he was “made whole”, but the time spent was exerted in excoriation of the plaintiff’s arguments, to wit:

Plaintiff argues that he should be allowed to retain the PIP benefits because he has not been fully compensated for all of his damages. However, Premera was not required to compensate plaintiff for his lost wages, pain and suffering, or any other non-medical component of his alleged damages.

And again:

The subrogation provision does not require that plaintiff be made whole before the Plan can seek reimbursement. In fact, the Ninth Circuit has explained that there is “no need to use [the] make-whole doctrine when [the] plan specifically provides for [the] insurer’s first priority.” Barnes v. Indep. Auto. Dealers Ass’n Health & Benefit Plan, 64 F.3d 1389, 1392 (9th Cir.1995). In this case, the PIP exclusion provides for Premera’s first priority. Accordingly, under the Plan, Premera was permitted to seek reimbursement after plaintiff received PIP benefits.

[ For more context on this issue, see :: The “Make Whole” Defense To Reimbursement – Rule of Interpretation Or General Equitable Defense?]

Note: One may wonder what language in the plan justified the refunds obtained by the plan. The provision was as follows:

“We have the right to recover amounts we paid that exceed the amount for which we’re liable. Such amounts may be recovered from the subscriber or any other payee, including a provider.”

Recoupment Compared – I have previously noted the remedy of recoupment as potentially applicable in the health plan context. This case could be viewed as a first cousin to that form of remedy. In most cases, particularly when the dollars involved are not substantial, providers will refund payments if made in error. Of course, significant caselaw has been developed on the issue of whether providers are required to do so, and the providers have had success in arguing that they are not. In the smaller cases, however, the providers value their relationship with payers and, especially when in network, one may expect that refunds will be forthcoming when requested by the plan.

Third Party Language – Many attorneys attach great importance to the language in reimbursement provisions on the point of “first party” versus “third party” coverage. It appears from cases such as this that, though clarity is always preferable, courts will often give “third party” phraseology a generous construction, particularly where the standard of review is deferential.