Here’s something every health plan and benefits administrator needs to know: Health plan recovery rights exist because of and to the extent of a plan’s subrogation provision.
Such plan language is critical. Without a subrogation provision, there is no legal ability for a health plan to make a recovery when a third party is responsible for the member’s injuries. As such, having a strong subrogation provision is an important health cost containment tool.
In evaluating your subrogation plan provision, consider the following points:
1. Begin with the end in mind
No Plan Administrator or TPA on behalf of a plan wants to litigate a subrogation claim, but when it comes to ensuring optimal subrogation language, you must know what language will win in litigation. Having the right language for litigation means you will have the best language for resolving cases without litigation. The best subrogation provision is built on a solid foundation and adds other provisions with guidance and periodic review by subrogation language experts.
2. Start with a solid foundation
There are many language considerations leading to an optimal subrogation provision, but there are some key foundational requirements that must be present in every subrogation provision to maximize subrogation recoveries.
Specifically, an effective subrogation program must include both the right of “subrogation” and the right of “reimbursement.” While the term subrogation is used as a catchall for a health plan’s recovery rights, “subrogation” (the right to stand in the shoes of the injured plan member and pursue a claim directly against the at-fault party) and “reimbursement” (the right to pursue recovery against the plan member after the member has made a recovery from the at-fault party or any first party insurance company) are distinct claims that need to be specifically addressed in the health plan’s subrogation provision. If both “subrogation” and “reimbursement” are not distinctly identified as a recovery right of a plan, then a plan’s recovery rights are at risk.
The other foundational “must have” provisions are terms that disavow the made whole doctrine and the common fund doctrine, since state and federal courts will apply those doctrines if a plan does not have the correct plan language opposing them. The made whole doctrine requires that a plan member be fully compensated for the full value of all the member’s damages before a health plan can make a recovery. When you consider damages like pain and suffering, the value of a member’s case can be highly subjective (meaning the member or member’s attorney can almost always argue that the member has not been made whole), and a plan needs to eliminate that risk by disclaiming the made whole doctrine.
Courts will also automatically reduce a plan’s recovery by attorney fees if the plan does not have language clearly disavowing the common fund doctrine. If your plan lacks language countering either doctrine, then the plan will be at meaningful disadvantage in making a full or appropriate recovery.
3. Other provisions/expert help
There are additional provisions that apply to numerous, specific fact patterns that often challenge health plan recovery rights. These provisions aren’t as vital as the foundational language requirements noted above, but they are key to a successful subrogation program, nonetheless.
These provisions have evolved over time based on U.S. Supreme Court, Appellate Court, and District Court cases and failure to include all the language or to word the provisions correctly can cost a plan in court cases or in negotiations. As such, you need to make certain an expert routinely reviews your plan language for completeness and accuracy.
Every cost containment tool matters with today’s continued increases in healthcare costs. That’s why it’s so important to take the time to review the subrogation provision in your plan language to make certain that it will result in the greatest recovery possible for all circumstances.
If you need assistance reviewing your subrogation provision, Intellivo’s 25 years of experience can be of use. Our experts are available to review your plan’s or your clients’ plans’ subrogation provision to confirm it is up to date with the latest case law requirements that maximize subrogation recoveries.
Interested in more? Check out our just published eBook “Subrogation for Health Plans: 5 Things to Know.”