In Colorado personal injury cases, attorneys are required to resolve healthcare-related liens incurred by victims of personal injury before they receive full disbursement. Subrogation is the term describing a legal right held by health insurance carriers, Medicare, and Medicare to pursue reimbursement for medical expenses paid by a benefit plan. One federal law has an enormous impact on subrogation – the Employee Retirement Income Security Act of 1974 (“ERISA”).
What is Colorado’s Law Regarding Subrogation in Injury Claims?
Colorado has exceptionally generous legislation regarding the reimbursement of health insurance carriers following a personal injury settlement. Specifically, C.R.S. 10-1-135 limits the ability of a “payer of benefits” to seek reimbursement of benefits in a personal injury claim “only if the injured party has first been fully compensated for all damages arising out of the claim.” The Colorado statute does not clarify what is meant by “fully compensated” but does specify a presumption that when the injured party receives the policy limits from the liability insurer, he or she has not been fully compensated. In order for the subrogated health insurance carrier to evaluate whether an insured was made whole, the insured must provide Notice detailing (1) the total amount of recovery; (2) the coverage limits applicable; and (3) the amount of costs charged to the insured. If, upon review of the Notice, the subrogated health insurance carrier disputes the made whole argument, they are required to request arbitration no later than 60 days. In that event, the insured and carrier jointly select an arbitrator to resolve the dispute.
C.R.S. 10-1-135 also legislates the Common Fund Doctrine by making subrogated health insurance carriers who successfully seek reimbursement responsible for a proportionate share of attorney’s fees. The law is based in equity, requiring each member of the group benefiting from the settlement to bear a portion of the costs of obtaining the funds. The doctrine is designed to protect victims of personal injury in Colorado by preventing insurance company that did not participate or assist in the personal injury claim from submitting for full subrogation without helping pay attorney’s fees.
What is ERISA?
ERISA is a federal law designed to protect employees of large companies. It was originally created to establish minimum standards so individuals would have access to affordable and fair health plans. Most Colorado employers pay premiums to a health insurance carrier and the carrier pays for medical care rendered to the employees. There are two types of ERISA plans: (1) self-funded/ self-insured and (2) unfunded/ fully-insured.
Under a self-funded/ self-insured ERISA plan, the employer – not a health insurance carrier – pays medical benefits directly through its general assets or through a trust fund established for that purpose. If a plan is unfunded/ fully-insured, on the other hand, the employer does not pay the benefits, bur rather, the employer purchases an insurance policy via the plan and the health insurance carrier pays the losses. The type of plan has a dramatic impact on the subrogation potential and recovery. Generally, a self-funded ERISA Plan always receives the benefits of ERISA preemption and fully-funded ERISA Plans sometimes receives the benefits of ERISA preemption. If the ERISA Plan is fully-funded, the Plan’s language can, in certain circumstances, trump state law and allow preemption. Most employees do not know their plans are self funded because their health insurance cards show the managing health insurance carrier’s name. Understanding a health insurance plan is necessary to determine the amount of subrogation.
ERISA policies are also required to include language establishing the plan’s provisions claiming their right to subrogation. The plan must explicitly authorize their claim for reimbursement. Most people are not aware the language exists but drafters know exactly what to include for reimbursement clauses to be enforceable. Accordingly, if an ERISA contract neglects to include the proper language, the ERISA provider may not be entitled to receive the right to reimbursement. However, this is a rarity. As long as the proper contractual language exists and the plan is self-funded, ERISA liens will likely attach to personal injury settlement proceeds. Therefore, when a personal injury victim in Colorado accepts benefits from an ERISA self-funded plan, ERISA receives a subrogation interest in the personal injury proceeds.
How Can I Determine if my Plan is Subject to ERISA?
With the self-funded v. insured question looming, the next question is where to look and what to look for to answer this all important question. The most important document to review is the Summary Plan Description (“SPD”). The SPD is a detailed document that informs plan participants about how the plan operates and is managed. Among other things, the SPD must clearly identify in easily understood language the following items:
- A description or summary of the benefits;
- The plan name, sponsor, and administrator;
- Funding mechanism;
- Participation and qualification guidelines;
- Calculation methods for service and benefits;
- Benefit vesting schedules;
- Benefit payment procedures and timing;
- Claims submission process;
- Claims appeal process;
- Address for service of legal process;
- Circumstances that may result in ineligibility or a denial of benefits;
- A statement of participants’ ERISA rights and other technical notices.
In the event an employee has questions regarding the plan, a participant can request the SPD from the plan administrator. Every plan administrator must provide a copy of the SPD to participants (1) when a new plan takes effect; (2) when an employee becomes eligible to participate in a plan; and (3) upon written request of a plan participant.
Outside of the SPD, another helpful place to evaluate whether an insurance plan is subject to ERISA is by reviewing the Form 5500 online. This is also the fastest way to get an idea of how a Plan is funded. The Form 5500 is a federal filing that must be filed annually by each employer maintaining an ERISA plan. To access this information, go to www.freeerisa.com and search an employer’s name. There is no cost associated with the search. After pulling the Form 5500, participants can review page 1, elements 9a (“plan funding arrangement”) and 9b (“plan benefit arrangement”). Each of these elements list the following options: (1) insurance; (2) Section 412(e)(3); (3) Trust; and (4) General Assets of the Sponsor. If boxes (3) and/or (4) are marked on both 9a and 9b, the inquiry stops because trusts and general assets exclude all policies of insurance and therefore are clearly fully self-funded Plans. If one or more of the boxes are checked, the inquiry continues through review of the schedules attached to Form 5500.
Schedules A and C are guiding. Each of these schedules provide further details concerning the relationship between the payor of benefits and the Plan. Confusion often lies in looking at the Form 5500 because large companies will have several benefits plans reported, sometimes resulting in multiple Schedule As and Cs attached to the Form 5500 (i.e. one for a dental plan; one for a vision plan; one for a life insurance plan etc.). This is expected when dealing with multiple funding arrangements being selected that describes the multiple plans.
If, upon review, there is no Schedule A Form, it is still necessary to review Schedule C. If there is a Schedule A Form, it is important to review the named insurance company under Part 1(a). In addition, it is important to review Part III(8). There are multiple boxes that can be checked. Box 8(a) (“Health”) should be marked. If any other box in Box 8(a) is marked other than (i) “Stop-Loss,” the plan is insured and Colorado law applies. If there is no Schedule A Form, the necessary information is likely on Schedule C. On Schedule C, it is necessary to look at “Claims Processing,” “Contract Administrator,” and “Plan Administrator.” An insurer providing insurance will not listed on Schedule C and therefore it is a fully self-funded Plan.
In addition to the foregoing, some Plans use Stop-Loss Insurance to pay claims. Stop loss insurance is an arrangement between the employer and an insurance company whereby the Plan is self-funded up to a certain predetermined maximum loss (either per employee or in the aggregate) and once that level is reached, the insurance company pays the rest of the benefit. Again, this will be revealed on the Schedule A.
What Documents Should I Request to Determine if ERISA Applies?
While the Form 5500 and Schedules A and C will often reveal whether the Plan is self-funded or insured, it remains important to request documents from the Plan to be sure you have the funding relationship correct. ERISA negotiations come down to what the Plan language itself says or does not say so getting the Plan itself is absolutely necessary. When requesting documentation to determine whether ERISA applies, it is necessary to request the following:
- The Summary Plan Description;
- The Actual Plan or Contract;
- The Latest Summary Annual Report;
- The Latest Terminal Report;
- The Bargaining Agreement;
- The Trust Agreement;
- Any evidence your client was supplied with a copy of the Summary Plan Description.
When dealing with a third party administrator (Optum; Rawlings etc.) representing the Plan and/or the Plan Administrator, they should be able to get this documentation. Oftentimes, the third party administrator is only able to get the Summary Plan Description. In those situations, request the documentation pursuant to Section 1024(b)(4), Title 29, US Code. Under this code section, should the Plan Administrator fail to provide the documentation within 30 days, a fine of $100 a day until production can be obtained by the plan participant.
Contact a Colorado Personal Injury Law Firm Today
If you are injured in an accident and your medical bills are paid by an employer funded plan, whether it is partially insured or completely self-funded, you need to contact a Colorado personal injury law firm immediately. The attorneys at the Denver-based personal injury law firm of Bowman & Chamberlain, LLC, know how to handle ERISA Plans. Our attorneys have extensive experience evaluating employee benefits health plan liens. Make sure to hire a Colorado personal injury law firm that knows how to handle ERISA health and benefits plans. Contact the Denver personal injury law firm of Bowman & Chamberlain, LLC, to learn more.
Owner and Managing Attorney
Jerry Bowman, J.D., M.A., Owner and managing attorney of Bowman Law LLC, takes his responsibility to the legal profession seriously and dedicates his time and effort to providing quality and competent legal representation to clients in Denver and throughout all of Colorado. He holds an MA in Political Science from Wayne State University and earned his law degree in two and a half years from Michigan State University College of Law.