What type of subrogation provision in a health plan can be enforced against a plan participant under the Supreme Court’s recent ruling in Sereboff? (Read about Sereboff here.) The Eleventh Circuit in two recent cases–Popowski v. Parrott and BlueCross BlueShield v. Carillo (combined into one opinion)–interpreted Sereboff and held that one type of reimbursement/subrogation provision could be enforced while another could not.
The court upheld the plan’s right to reimbursement in the Popowski case, but rejected the plan’s right to reimbursement under the BlueCross BlueShield (“BCBS”) case. What was the difference in the results? Plan language. Excerpt from the Popowski opinion:
The subrogation and reimbursement provision in the United Distributors Plan claims a lien “on any amount recovered by the Covered Person whether or not designated as payment for medical expenses.” PR1-1, Exh. G at 63. It further clarifies that “[t]he Covered Person . . . must repay to the Plan the benefits paid on his or her behalf out of the recovery made from the third party or insurer.” Id. (emphasis added). Thus, language essentially identical to the Supreme Court’s characterization of the plan language in Sereboff, specifies both the fund (recovery from the third party or insurer) out of which reimbursement is due to the plan and the portion due the plan (benefits paid by the plan on behalf of the defendant). Unlike in Knudson, a significant portion of the funds specified went directly into the Parrotts’ bank account and, thereby, was in their possession for purposes of this case. Thus, at the time they filed their suit, Popowski and the Commerce Group sought “not to impose personal liability on [Parrott], but to restore to the plaintiff[s] particular funds or property in [Parrott’s] possession.” See Knudson, 534 U.S. at 214, 122 S. Ct. at 714-15. Accordingly, we conclude that Popowski and the Commerce Group have stated a claim for “appropriate equitable relief” under § 1132(a)(3) and that the district court erred in dismissing the suit for lack of subject matter jurisdiction.
Contrast that with the court’s decision in the BCBS case:
The subrogation and reimbursement provision in the Mohawk Plan, unlike that of the United Distributors Plan, claims a right to reimbursement “in full, and in first priority, for any medical expenses paid by the Plan relating to the injury or illness,” but does not specify that that reimbursement be made out of any particular fund, as distinct from the beneficiary’s general assets. BCBS Letter Br., Exh. B; BR1-1 at 3. Instead, it makes receipt of “a settlement, judgment, or other payment relating to the accidental injury or illness” a trigger for the general reimbursement obligation. Id. Further, in requiring reimbursement “in full”, it fails to limit recovery to a specific portion of a particular fund. Accordingly, we conclude that, because the Mohawk plan fails to specify that recovery come from any identifiable fund or to limit that recovery to any portion thereof, it fails to meet the requirements outlined in Sereboff for the assertion of an equitable lien for the purposes of 29 U.S.C. § 1132(a)(3). For this reason, we conclude that it was not error to dismiss BCBS’s claims.
The case illustrates how those representing employers and/or health plans should review the plan document language and SPD language to ensure that it tracks the language of Sereboff in order to better ensure that the Plan will be in a position of recovering under the principles laid out in Sereboff.
It is interesting to note that in 2005 the DOL had filed an Amicus Brief in the BCBS case which you can access here.