Our friend Professor Roger J. Baron recently mailed a letter, the text of which is below, to President Obama, asking him to consider encouraging the U.S. Dept. of Labor (DOL) to require ERISA plans to disclose information concerning subrogated recoveries on Form 5500. Although Professor Baron previously recommended this to the DOL, they did not implement his suggestion.
As you know, ERISA plans are governed by federal law, and often create huge obstacles in our clients’ personal injury cases. Professor Baron’s suggestion to the President posits that the inclusion of subrogation recoveries on ERISA plans’ form 5500s would shed light on the aggressive nature by which ERISA plans pursue reimbursement, and would be a catalyst for “meaningful reform aimed at equitable treatment for these victims who are injured twice—once by a tortfeasor and then again by their health insurers.”
How can we help?
-If you know someone on the President’s staff, or if you are in a position to encourage a member of Congress, please reach out and ask that person to request President Obama review Professor Baron’s letter and consider his request
-If you are able to influence a trial lawyers association, or other lobby group sympathetic to the cause, please reach out
-Write a letter of support to the White House, or send an email message of support at http://www.whitehouse.gov/contact/
August 1, 2016
President Barack Obama
The White House
1600 Pennsylvania Avenue, N.W.
Washington, DC 20500
RE: Encouragement Sought for Proposed Administrative Action (Mandatory disclosure of Subrogated Recovery information by ERISA health plans)
Dear President Obama,
I listened to every word you spoke at the DNC last week. Your words and commitment to persisting in “just causes” inspired me to, once again, seek reform in an area I am very passionate about—ERISA reimbursement.
I have dedicated much of my academic and professional career to addressing the injustices that are propagated when ERISA health care plans pursue subrogation (reimbursement) claims. Much of my work (published articles, briefs, educational videos, etc.) is available at my website, www.erisawithprofessorbaron.com, which serves as an ongoing resource for injured persons and their attorneys. In addition to numerous scholarly publications on this subject, I have been involved in dozens of lawsuits (at both federal and state levels) and have worked with members of Congress on possible legislative reform. I am sad to report that, as it concerns my judicial and legislative efforts, my losses in these efforts far outweigh my victories. As the law exists today, ERISA plans are free to pursue subrogation (reimbursement), largely without limitation.
Prior to the enactment of ERISA in 1974, subrogation on personal injury claims by health insurers was non-existent. In fact, state laws everywhere protected the public by adhering to the common law prohibition against such claims. In the 1980s, however, health insurers began to aggressively assert such claims—taking away recoveries intended for the victims and channeling the funds back to the profit coffers of the insurers. Portions of these subrogated recoveries are funneled into executive compensation for health insurers—executive compensation which, as you are surely aware, has become ridiculously exorbitant. I have worked with many catastrophically injured persons who, as a direct result of their health insurer’s subrogation claim, end up receiving little or no money despite having sustained permanent disabling injuries.
Currently, state laws safeguard victims confronted with subrogation claims. Although the extent of the protection varies from state to state, protections are in place. But ERISA plans—being creatures of the federal law—are not subject to state statutes and regulations. Over the years, health insurers have learned to avoid the application of state law by offering coverage through ERISA plans in a frighteningly deceptive manner. The existence of “insurance” involvement is masked from the consuming public and subrogation/reimbursement efforts are pursued in the name of the ERISA plan, yet the recovered funds are channeled back to insurers who are otherwise subject to the state law. ERISA was not intended to operate this way.
Under ERISA’s Saving Clause*, state law is applicable to insurers on the risk. The U.S. Supreme Court ruled in FMC v. Holliday (1990)** that state law relating to subrogation does indeed apply to insurers providing coverage to ERISA plans. Additionally, you entered an Executive Order on May 20, 2009, cautioning administrative agencies to proactively investigate the merits of state law and avoid arbitrarily invoking federal preemption. Unfortunately, ERISA’s Saving Clause, the rule of FMC v. Holliday, and your Executive Order have been evaded because insurers are adept at hiding the insurance connection.
According to statistics provided by U.S. Chamber of Commerce, the insurance industry recovers more than $1 Billion annually from reimbursement alone. See Amicus Curiae Brief for Society for Human Resource Management and U.S. Chamber of Commerce filed in Sereboff v. Mid Atlantic Medical Services, Inc., 126 S. Ct. 1869 (2006). (Brief is accessible at 2006 WL 467695, with these statistics reported at * 15-16.)
What can be done about this? In an article which has been published by trial lawyer journals in eight different states, I recommended that the U.S. Department of Labor (DOL) require ERISA Plans to report the details of subrogated recoveries in their annual form 5500 filings. The DOL did not accept my recommendation.
As I sit on my home computer, in my office in our retirement home in Arkansas, I am grateful to you for inspiring me to ask you directly to take a look at this issue. I encourage you to make a recommendation to the DOL to give serious consideration to my proposal. I am enclosing a few documents for your consideration.
Thank you for allowing me to reach out to you directly.
Very truly yours,
Roger M. Baron
*The “saving clause”–29 U.S.C. 1144 (b)(2)(A):
“Except as provided in subparagraph (B), nothing in this subchapter shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities.” (emphasis added)
**In FMC Corp. v. Holliday 498 U.S. 52, the ERISA plan secured 100% of the plan participant’s tort recovery of $49,825 despite the fact the plan member’s medical expenses alone exceeded $178,000. The Court noted that the reimbursement was sought by the plan on behalf of itself and not for an insurer of the plan. As to any such affiliated insurers on the risk, the Court stated,
On the other hand, employee benefit plans that are insured are subject to indirect state regulation. An insurance company that insures a plan remains an insurer for purposes of state laws, ‘purporting to regulate insurance’ after application of the deemer clause [of ERISA]. The insurance company is therefore not relieved from state insurance regulation. The ERISA plan is consequently bound by state insurance regulations insofar as they apply to the plan’s insurer. Id. at 62.