Reimbursement of medical expenses

[Guest JD698]

An ERISA based health plan paid out over $56,000 in medical expenses for a member who was injured as the result of an accident. The member had signed an agreement for reimbursement. The member has since recovered a signifcant sum, well over the amount expended by the fund for his injuries, from the tortfeasor. The Health Fund has exercised it's right of subrogation/lien. The amount owed is being held in escrow by the member's attorneys, however, the member has refused to pay the monies owed. A lawsuit has been initiated in Federal Court seeking equitable relief.

Is it a breach of fiduciary duty to compromise the amount owed to settle this or is it legal to accept less in order to resolve this matter?

Any help would be greatly appreciated. Thank you.

[Guest bayarea1]

Right of recovery has always been a balancing act between the cost(s) of litigation and viable return. As such, negotiation is common. Evidently, this is a bet the member and their advisor are willing to take.

While not legal opinion, it has been my experience that legal counsel frequently refuse acknowledgement of and/or stall in response to subrogation rights, hoping to gain a reduction of their client's obligation. Many major benefit administrators have been known to discontinue pursuit of the subrogation after a specific period of time. However, that trend appears to be reversing itself, as many self-funded programs have become increasingly budget conscious.

Health plans are not eager to disclose the number of cases and the percentage of recovery for obvious reasons, but I know of one small self-funded plan that published the correlation between lost subrogation and member premium contributions.

[Ron Snyder]

Recovery from a tortfeasor is not necessarily a "reimbursement" of medical expenses, although it may be. This is a developing area of the law.

With that in mind, the fiduciary's duty to the plan is discharged if he behaves reasonably, both subjectively and objectively, in deciding whether to litigate to pursue a claim or whether to settle for less. While good records ought to be maintained by the fiduciary in case a claim against him/her/it is filed (in hopes of getting free money from the E&O carrier, the fiduciary still has to make the best decision possible. It is certainly not a breach of duty per se to settle or compromise such a claim.