ERISA guides employer-provided healthcare plans. For those covered under the plans, including employees or their beneficiaries, an ERISA Plan expects to be repaid for any medical bills covered by insurance. The effort to attain this repayment is referred to as ERISA Reimbursement.
The idea of reimbursement is an extension of a more traditional subrogation. However, in a contemporary reimbursement policy, the safeguards associated with subrogation are often absent.
After an insurer pays a claim to the insured party, the insurer can attempt to gain recompense by metaphorically stepping into the role of the insured and filing a claim pursuing the tortfeasor, who could be held liable for any losses.
The right to reimbursement of an ERISA plan can essentially be classified as a subrogation claim, as the difference between reimbursement and subrogation are minimal. Traditionally, common law limited the ability of an insurance agent to pursue subrogation to property damage claims only. Filing a subrogation claim in the case of personal injury was illegal. Today there is almost no oversight of ERISA Plans that seek reimbursement of their claims. This situation is attributed to a federal preemption that occurred when ERISA became law in 1974. Until that time, Congress had strictly prohibited insurance companies from seeking reimbursement for health claims.
Based on legal history, the first ruling in regard to subrogation for a personal injury claim occurred in 1982, during the case of Frost vs. Porter Leasing Corporation in Massachusetts. In this case, the subrogation was denied. However, many more ERISA reimbursement claims entered the court room during the late 1980s. Federal courts have been resistant to allow subrogation in these cases, although current statistics indicate that ERISA reimbursements total almost one billion dollars annually.
Money is collected by seizing contractually obligated payments and other tort-based recoveries received by victims of personal injury. Insurance companies maintain their member premiums by pursuing reimbursements by placing priority on the “first dollar.”