Reprinted with permission from Roger Baron
“Today the Supreme Court granted the Petition for Writ of Certiorari in the US Airways v. McCutchen, the 3rd Circuit Decision which authorized the federal trial court to consider traditional equitable defenses when considering a reimbursement (subrogation) claim. The Court’s decision to grant the petition is one which benefits United Health Care and similarly situated health insurers which are involved in health care benefit plans operating under ERISA.
Below is some background information which my assistant Marilyn Trefz and I have uncovered concerning the “funding” of US Airways health plan. Th plan is administered by United Health Care. And, it is also likely that United Health Care also provides insurance coverage to this plan – most likely in the nature of “stop loss coverage.”
According to the form 5500 filed with the U.S. Department of Labor for the year 2009, the US Airways plan paid United Health Care compensation of $10,971,655. It is unlikely that this amount (almost $11 Million) describes compensation related solely to fees earned for processing individual medical claims. Many times when commercial insurers, such as United Health Care or Aetna, serve as claims administrators, these insurers also provide stop-loss coverage which is in the nature of umbrella coverage which kicks in after a certain “attachment point” or deductible is reached on an individual. Premiums paid for stop loss coverage are likely included in this reported compensation.
Any payment made by United Health Care for medical bills, as a result of its stop loss coverage, will be given back to United Health Care if a subrogated recovery or “reimbursement” is realized. Furthermore, regardless of whether United Health Care has paid medical bills through stop loss coverage, it is compensated on a contingency basis for its work in collected reimbursement amounts. This contingency is set as a % and can be 50%, 40% or 1/3 of the amount collected. This means that a substantial portion of all reimbursement recoveries awarded to U.S. Airways is actually paid to United Health Care.
United Health Care has received some degree of notoriety because it is very generous with executive compensation. In fact, for the year 2009, its CEO received $102 Million in Executive Compensation. Click HERE to see an article from the Minneapolis Star Tribune. (If you recall the year 2009 was the year of the great collapse of the American economy.)
You should also remember that subrogated recoveries, which are not actuarially factored into rates, are utilized as sources of profit. There is no doubt in my mind that a portion of the $102 Million paid in executive compensation to United Health Care’s CEO stem from subrogated recoveries which are pursued by Ingenix (United’s wholly owned subsidiary) on ERISA reimbursement files.”