Few know it, but if you are injured at the hands of a careless driver, defective product, unsafe property, or negligent physician, and if you assert a claim, your recovery may be limited or even eliminated because you carry health insurance.
Traditionally, Ohio health insurers covered medical bills incurred treating injuries from car accidents and other incidents, whether or not that collision or incident gave rise to a claim for compensation. Furthermore, injured individuals could receive compensation for medical bills even if those bills were paid by a collateral source. In response, health insurers began writing subrogation/reimbursement clauses into their policies, and today such clauses are virtually universal. In so many words, those provisions state that the health insurer will pay your medical bills from a car collision, etc., subject to your co-pays and deductibles, but that if you receive compensation from a third party, such as a car insurer, then you are required to repay your health insurer for what it paid on those medical bills.
These subrogation clauses can lead to very unfair results. Let's say that you are involved in a motor vehicle collision at an intersection, and the question of who had the green light is in dispute. As a result, the best award or settlement you can obtain is a compromise. After attorney's fees, litigation expenses, and repaying your health insurer, you might be left with little or no money for compensation to you.
Recognizing that an innocently injured victim should receive compensation before a health insurer (which received a premium payment for the coverage it provided) obtained anything in reimbursement, Courts developed a rule which put the health insurer in line behind the injured person. After all, the victim is the one who was hurt, and is the one paying the attorney and costs, and any reimbursement would be more or less of a windfall for the health insurer. This Make Whole Rule stated that the health insurer was not entitled to anything out of the award or settlement until the victim was "made whole." What amount of compensation would make the injured party whole was left to the discretion of the Court, but as a general rule of thumb, a victim has not been made whole until he or she receives at least one-third of the total compensation.
Not surprisingly, health insurers and their lawyers fought aggressively against the Make Whole Rule, without any regard to the victim. In Ohio, the Make Whole Rule has been, for all intents and purposes, eliminated. So too, the Federal Courts have virtually eliminated the rule in cases involving ERISA plans, which provide health insurance under the Employment Retirement Income Security Act.
As a result, in many cases, health insurers swoop in and take all or virtually all of the proceeds from personal injury claims, leaving claimants (and their attorneys) with little or nothing. Recently, however, the United States Supreme Court created a glimmer of hope for claimants who carry health insurance under an ERISA Plan. In the case of US Airways, Inc. Employee Benefits Plan v. McCutchen, Justice Elena Kagen, writing for the Court, held that under certain circumstances, a claimant could protect a portion of his/her recovery from the ERISA health insurer, as an attorney's fee, which in that case was 40% of the entire recovery.
Presumably, the attorney would then provide the client compensation out of that protected portion of the recovery. Clearly, many claimants will not be "made whole" under such a scenario, but at least he/she will receive something in the way of compensation.
It should be noted that in the McCutchen case, the ERISA Plan was silent on the issue of the allocation of attorney's fees, allowing Justice Kagen to perform the intellectual gymnastics necessary to protect part of the settlement. Presumably, health insurers will now start writing provisions into their policies to take away even this small amount of compensation for the victim, in favor of the health insurer. And unless or until state and federal legislators act, claimants with health insurance will continue to be shortchanged in their claims.
