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Birmingham Bar Association Bulletin - Fall 2013

ERISA M. Clayborn Williams; SinclairWilliams LLC Handling ERISA Reimbursements After U.S. Airways v. McCutchen Imagine you go to work for an employer who offers healthcare coverage. The healthcare plan includes a provision that gives the plan (or the insurance company providing benefits thereunder) the right to obtain reimbursement from you for any recovery you may obtain against a third party for medical expenses which the plan has paid. The healthcare plan also states that it will not credit you for the cost of obtaining any such recovery. Imagine next that you are seriously injured in a car accident. You suffer over $1 million in damages, including $100,000 in medical expenses which your healthcare plan paid, and in your quieter moments you thank Providence that you are one of those fortunate Americans with healthcare coverage. Because someone else was at fault for the accident, you hire a well-regarded personal injury attorney to pursue a recovery against the third party which struck you. Your attorney secures a policy-limits settlement for you which totals $100,000, $40,000 of which goes to your attorney “Now your healthcare plan, having kept tabs on your action, comes to you legally demanding that it be reimbursed...” to satisfy his 40% contingency fee. This leaves you with $60,000, which although is the best that could be done for you, is not enough to have made you whole. Now your healthcare plan, having kept tabs on your action, comes to you legally demanding that it be reimbursed for the $100,000 in medical expenses it paid for treatment of your injuries. You suddenly find yourself worse off than you would have been if you had not pursued any recovery in the first place. Though these are not the precise facts of U.S. Airways v. McCutchen, __ U.S. __, 133 S. Ct. 1537, 185 L. Ed. 2d 654 (2013), the Court’s analysis in that case directs exactly this result. According to U.S. Airways, if an ERISA-governed healthcare plan unambiguously provides that it is entitled to first-dollar reimbursement and that no credit will be given to you for whatever costs you incurred in obtaining that recovery (like attorneys’ fees), the plan is entitled to a judgment against you for the full amount of the recovery. In U.S. Airways, James McCutchen had been involved in a serious automobile accident causing him substantial injury where his estimated damages exceeded $1 million. Mr. McCutchen’s health plan through his employer U.S. Airways paid $66,866 in medical expenses relating to his injuries. The U.S. Airways plan contained a provision entitling it to reimbursement if McCutchen later recovered money from the third party. In the personal injury action against the striking driver, McCutchen’s attorneys secured $110,000 in payments, from which McCutchen received $66,000 after deducting the contingency fee paid to his lawyer. U.S. Airways sought reimbursement from Mc- Cutchen of the entire $66,866 it had paid for his medical expenses, an amount which was more 30 Birmingham Bar Association


Birmingham Bar Association Bulletin - Fall 2013
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