The Supreme Court delivered a blow to insurance plans and a victory to injured beneficiaries in an 8-1 decision Wednesday that limits the circumstances under which plans may recover money from beneficiaries who win cash in court for their injuries.
The Supreme Court ruled in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan (PDF) that if a plan's beneficiary wins money in court for an injury but then spends it all, the plan may not then sue the beneficiary to recover the medical expenses it paid. The ruling applies to plans governed by a federal law known as ERISA, which includes plans provided by private employers.
Doug Haloftis, a partner at Barnes & Thornburg, said Wednesday was “not a good day for plans and, really, overall plan participants in general.”
“If the plans lose billions of dollars, it causes plan participant costs, in terms of premium dollars to go up,” Haloftis said.
The case arose after a drunk driver in Florida slammed into Robert Montanile's vehicle in 2008. Montanile won $500,000 in court, but then spent it all on ongoing medical expenses, lawyers' fees and his young daughter.
His health insurance administrator, however, argued that Montanile still had to reimburse it for the money it spent on his care, regardless of whether he had already spent the $500,000.
The decision shields injured beneficiaries from financial ruin, said Dana Berkowitz, an attorney for Montanile and a partner with Stris & Maher.
Robert Betts, executive director of the National Elevator Industry Benefit Plans, which administers collectively bargained employee benefits, declined to comment Wednesday morning.
But in court documents the administrator had argued that plans should not have to spend their limited resources paying medical bills that should be paid by the wrongdoer. It's common for insurance plans to include provisions requiring beneficiaries to reimburse them for costs of medical treatment should they win money in court for their injuries.
Plans pull in more than $1 billion a year in such reimbursements, the administrator said. Allowing beneficiaries to avoid making those payments could raise costs for insurers, and in turn, beneficiaries, the administrator argued.
Haloftis said plans have always had to monitor third-party litigation over injuries for which they've paid medical costs. But the decision Wednesday means they'll have to be extra diligent in tracking such litigation.
Robert Rachal, senior counsel at Proskauer Rose, said plans are now going to have to work faster to recover money won in court.
Rachal, however, said the decision's impact on plans might not be as significant as some are predicting. He noted that in many circumstances, insurers aren't able to recover much money anyway once a beneficiary has already spent cash won in court.
Either way, plans will likely have to live with the Supreme Court's decision for some time. Haloftis said he believes it's unlikely the Supreme Court will revisit the issue any time soon.
In its decision Wednesday, the Supreme Court also sent the case back to U.S. District Court, ordering it to determine exactly how much of Montanile's settlement remained when the plan sought reimbursement, in case it has not all been spent.
The Supreme Court's decision reverses a ruling out of the U.S. Court of Appeals for the 11th Circuit.