Individuals in Chicago with employer provided health insurance governed by ERISA who have been injured in an accident have been disappointed to find out that after their injury case settled, the health insurer demanded full repayment of the medical costs. This has been problematic for several reasons. Usually, the cases involve some uncertainty, and they settle for less than the full demand. Alternatively, your injuries may have been caused by a person who carried less insurance coverage than necessary to fully compensate you. Nevertheless, courts routinely held that if the health insurance plan contained a reimbursement clause, the plan could place a lien on your settlement funds for full reimbursement of medical costs.
Recently, the Supreme Court agreed to hear a case where the United States Court of Appeals for the Third Circuit held that it was not “appropriate equitable relief” for the plan to obtain full reimbursement, when the individual could not obtain a full recovery himself. See U.S. Airways, Inc. v. McCutchen, 663 F.3d 671 (3d Cir. 2011). In McCutchen’s case, if the plan were entitled to full reimbursement, after paying the legal fees and costs of obtaining the recovery, he would actually be worse off than had he not pursued any recovery in his personal injury matter. This is similar to a recent case from the Ninth Circuit, where the court held that the insurance plan’s claim was limited by equitable defenses where the injured party only recovered 21% of her damages. See CGI Techs. & Solutions, Inc. v. Rose, 683 F.3d 1113 (9th Cir. 2012). The Supreme Court will thus answer the question whether health insurance plans always get full reimbursement, or their claims can be reduced where the injured party recovers less than her demand, and whether the plan must share in attorney fees and costs.
The issue of reimbursement typically impacts individuals involved in personal injury matters, with a health insurance plan that covered their medical costs. It also impacts long term disability insurance recipients who have subsequently been awarded Social Security disability benefits. If the Supreme Court holds that the health plan must share in legal costs in McCutchen, it may mean that long term disability insurers must pay your lawyer’s fees for obtaining Social Security disability benefits.