ERISA Liens and 100% Reimbursement

When you are injured in an accident and your medical insurance pays some (if not all) of your medical bills, it expects to be reimbursed from the proceeds of your settlement/judgment (see Medical Payment Reimbursement – Contractual Obligations You Need to Know). The amount of reimbursement you owe will vary greatly, depending on the nature of your medical insurance contract. Should you have a medical insurance contract that is considered to be ERISA-based (Employee Retirement Income Security Act), then special rules come into play which, for all intents and purposes, nullify the beneficial California-based laws governing the amount of reimbursement you’ll be required to provide to the insurance carrier. If you receive your health insurance through your employer, you likely, but not necessarily, have an ERISA-based health insurance plan. ERISA-based plans are governed by federal law, not state law. As a result, the rules for reimbursement are different and ERISA-based plans are not subject to the Made Whole Rule (if the insurance plan specifically waives the made-whole benefits) or the Common Fund Doctrine (see Medical Payment Reimbursement – Contractual Obligations You Need toKnow). What this means for your settlement is that, knowing you’ll likely have to pay back your medical insurance carrier 100% of the requested amount, the amount of money in your pocket at the end of your claim will be much less than if you were able to reduce or completely waive their right to reimbursement. For example, if you incur medical bills of $5,000 and those bills are paid for by your ERISA-based plan, your plan will expect reimbursement of $5,000 upon completion of your claim. This represents $5,000 that could otherwise have been yours (assuming the plan was not ERISA-based and the Made Whole Rule and the Common Fund Doctrine were applicable). However, there is hope in reducing the amount of reimbursement to an ERISA-based plan. While technically the plan could pursue 100% reimbursement, the plan also recognizes that without your personal injury attorney pursuing settlement on your behalf, they would have received nothing back toward the amount they expended paying your medical bills. With this understanding, the ERISA-based plan is often (if not all the time) willing to work with your personal injury attorney in negotiating at least some sort of reduction of their reimbursement request, even though they don’t have to. An experienced personal injury lawyer will know how to work with the ERISA-based plan from the start in order to protect your interests and negotiate the reimbursement amount down as much as possible.