A story on the front-page of yesterday’s Wall Street Journal focuses attention on an important legal issue, but one that I suspect a lot of people may not appreciate: a health plan’s right of subrogation. The article, entitled "Accident Victims Face Grab for Legal Winnings" discusses an employer health plan’s successful effort to obtain reimbursement for health care costs paid on behalf of an employee who was severely injured in a motor vehicle accident.
The employee, Deborah Shank, who was injured seven years ago, obtained a $700,000 settlement from the trucking company whose tractor trailer crashed into her car. After attorney’s fees and expenses were deducted, she was left with $417,000, which was put in a special needs trust for her future care. But her employer, Wal-Mart, Inc., pursued a lawsuit against her, seeking reimbursement for nearly $470,000 in medical expenses that its health plan had paid on her behalf.
A district court ruled in Wal-Mart’s favor, and that ruling was affirmed by the Eighth Circuit Court of Appeals in August. Administrative Committee of Wal-Mart Stores, Inc. Associates' Health and Welfare Plan v. Shank, 500 F.3d 834 (8th Cir. 2007). Mrs. Shank’s motion for en banc reconsideration of the decision was rejected last week, which leaves an appeal to the Supreme Court of the United States as her last hope.
Roy Harmon, in his Health Plan Law blog, described the article as “provocative,” and he’s right. Having Wal-Mart as the employer in this situation invites more scrutiny of its actions than another employer might receive. But I have found that entities, like corporations, that receive more attention for their actions than others receive often deserve the extra attention, and this is one of those situations.
Assuming that a health plan, like Wal-Mart’s, has language that entitles it to reimbursement of expenses paid on behalf of plan participants who receive compensation from an accident settlement or other third-party, the plan should be reimbursed. But as Roy also pointed out, most plan administrators try to work out settlements of claims such as Mrs. Shank’s for a couple of reasons, including the legal expenses that the plan might incur in pursuing a recovery and a plan’s natural reluctance to sue its own employee to recover the costs. Not surprisingly, neither of these factors was of concern to Wal-Mart. In fact, Mrs. Shank’s lawyer said he approached Wal-Mart about settling its claim, “but was told the health plan wanted to proceed with the lawsuit.”
There is one point mentioned in the article that I would like to have known more about. The author, Vanessa Furhmans, writes that after Mrs. Shank’s lawyer informed Wal-Mart that the settlement funds had been placed in a special needs trust, Wal-Mart waited three years to sue Mrs. Shank for the money. Why did Wal-Mart wait so long? After three years, isn’t Mrs. Shank entitled to conclude that Wal-Mart isn’t going to pursue any right of subrogation against her?
The Healthcare Neutral ADR Blog, written by Richard J. Webb, also has a post about the article, which highlights the need to “get all players at the table,” i.e., involve everyone who has or may have an interest in the settlement at a point when that involvement is meaningful. If you represent plaintiffs or defendants in personal injury litigation, sooner or later, you will confront a situation like this. The facts may not be outrageous as Mrs. Shank’s, but the scenario will be the same or very similar, and you need to be prepared. Likewise, if you do work for health plans, you need to be prepared to deal with situations like this one. Hopefully, an outcome like Deborah Shank’s will be the exception rather than the rule.
