About ERISA/Private Liens
The Employee Retirement Income Security Act of 1974 (ERISA) establishes the terms of employee pension and benefit plans. In terms of lien resolution, the subrogation rights of an ERISA plan are loosely defined by federal code 29 USC 1132(a)(3) which allows for “appropriate equitable relief.” It is from this statute that employee benefit health insurance plans are evaluated for their validity.
ERISA Plans are identified as being either self-funded or insured based on the group policy held by the employer. It is important to evaluate the Master Plan Description (MPD) of an ERISA plan to determine the validity of the lien.
For self-funded plans, in order to have an enforceable lien, the plan language must satisfy two requirements as outlined in (italicize) Sereboff v. Mid Atlantic Medical Services, Inc., 126 S. Ct. 1869 (2006). First, the language must identify a particular fund distinct from the member’s assets from which reimbursement is to be made. Second, the language must identify the particular share of that fund to which the medical benefits plan is entitled.
There are different types of private healthcare plans available in the market today. Most prevalent is the employee benefit plan (ERISA). Below is a brief description of other private plans that may have a right of recovery in a settlement:
A private plan that was purchased directly by the beneficiary for health insurance coverage. Retail plans are governed by state law.
State/Local Employee Plan:
Employee coverage for those who work in state or local government, which is established under state insurance law.
Stop Loss Insurance:
A plan that provides benefits after a threshold is reached by a group policy or self-funded plan. This is not an ERISA plan and their recovery rights are usually not validated by a contract.
With over 175 million Americans receiving employer provided or private health insurance, knowing your client’s obligation is your best defense in securing a fair settlement on their behalf.
ERISA/Private Insurance Glossary
An employee benefit plan where the employer has purchased a plan from an insurance company to provide benefits for their employees. The Summary Plan Description (SPD) or Form 5500 will typically identify if a plan is insured.
Master Plan Document (MPD)
The governing document outlining the coverage as well as the rights and responsibilities agreed to by the plan holder and the beneficiary. The Summary Plan Description (SPD) is a descriptive summary of the control MPD. The language may identify whether the plan is self-funded or insured under ERISA.
An employee benefit plan where the employer is providing health care benefits out of pocket. Larger companies are often self-funded and some may hire an insurance company in an administrative only capacity to handle claim processing and related functions. The Summary Plan Description (SPD) or Form 5500 will typically identify if a plan is self-funded.
Summary Plan Description (SPD)
Document outlining the coverage as well as the rights and responsibilities agreed to by the plan holder and the beneficiary. The language may identify whether the plan is self-funded or insured under ERISA.
ERISA/Private Insurance FAQ
Is my client’s Employee Benefit Plan an ERISA plan? Do we have to pay a lien?
ERISA states that a plan must have an enforceable subrogation/reimbursement clause in order to be provided with “appropriate equitable relief” (29 USC 1132(a)(3)) for the fair repayment of their lien. Upon evaluation of the insurer’s plan type (insured or self-funded), specific plan [ ] language, and state statute, we will be able to determine if a lien is exempt from repayment or whether it is subject to negotiation.
What law governs Non-ERISA or Private Insurance Health Plans?
These plans are governed by state law provisions detailing the insurer’s right of recovery and/or repayment terms. Some state laws also provide for mandated reductions in which the reimbursement is reduced by the pro rata share of attorney’s fees and costs. In Florida, the applicable law is Florida Statute Section 768.76(4) concerning collateral sources.
How do I obtain a copy of the Summary Plan Description and Master Plan Document?
ERISA requires plan administrators to provide the beneficiary with a copies of the SPD and MPD upon written request [ ]. If participants are unable to obtain the SPD directly from the employer, they may be able to obtain a copy by writing to the U.S. Department of Labor, EBSA, Public Disclosure Room, Room N-1513, 200 Constitution Avenue, N.W., Washington, D.C. 20210, for a nominal copying charge. Participants should provide their name, address and phone number to enable EBSA to contact them to follow up on the request.