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Presenting a live 90-minute webinar with interactive Q&A

Resolving ERISA Liens and Reimbursement

Claims in Personal Injury Cases Maximizing Settlement Awards by Narrowing Claims and Challenging

Unreasonable Charges; Effect of Montanile on ERISA Plan Rights

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

WEDNESDAY, SEPTEMBER 6, 2017

David L. Place, JD, Vice President, Director of Lien Resolution Services,

Synergy Settlement Services, Culpeper, Va.

Franklin P. Solomon, Founding Partner, Solomon Law Firm, Cherry Hill, N.J.

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4

STRAFFORD WEBINARS

SEPTEMBER 6, 2017

Franklin P. Solomon • Cherry Hill, NJ

PROBLEM AVOIDANCE

Post-Settlement Problems

Additional liability carrier demands

Documentation of claimed liens/payment

Reporting to CMS

Carrier satisfaction of reimbursement claim

Attorney guarantee of payment

An abundance of caution or an excuse for delay?

Terms of Settlement

Put it in writing

Put it on the record

7

Post-Settlement Problems

Reimbursement demands

New/unexpected claims

Amount of third-party settlement

Confidentiality agreements

Time for payment

Minor/Death cases; court approval

Know your plan claimant

What do they need to know and when?

8

Post-Settlement Problems

Attorney liability (ERISA)

Longaberger Co. v. Kolt, 586 F.3d 459 (6th Cir. 2009)

HEREIU v. Gentner, 50 F.3d 719 (9th Cir. 1995)

Drury Industries v. Goding, 692 F.3d 888 (8th Cir. 2012)

Harris Trust v. Salomon Smith Barney, 530 U.S. 238 (2000)

US District Courts are all over the lot on theories

9

Post-Settlement Problems

Attorney Liability (Medicare Secondary

Payer)

United States v. Stricker, (N.D. Ala. August 12,

2011, aff’d. 11th Cir., July 26, 2013)

42 USC §1395y(b)(2)(B)(iii): Action By United

States

Humana Ins. Co. v. Paris Blank LLP, 187 F.

Supp.3d 676 (E.D. Va. 2016)

42 USC § 1395y(b)(3)(A): Private Cause of Action

10

Post-Settlement Problems

Attorney Liability (FMCRA)

Military service members

Veterans

What did you agree to?

11

Employee Retirement Income Security Act of

1974

ERISA 12

ERISA Liens?

THERE IS NO SUCH THING AS AN “ERISA

LIEN”

• ERISA is silent on liens and creates no

reimbursement rights for employee benefits

plans

• Almost every health plan issued as an

employee benefit is subject to ERISA – but

some are not.

13

ERISA Coverage

ERISA applies to:

any employee benefit plan if it is established or maintained--

(1) by any employer engaged in commerce or in any industry or activity affecting commerce; or

(2) by any employee organization or organizations representing employees engaged in commerce or in any industry or activity affecting commerce; or

(3) by both.

29 USC Sec. 1003(a)

14

ERISA Exclusions

ERISA specifically excludes from coverage:

any employee benefit plan if--

(1) such plan is a governmental plan ....

(2) such plan is a church plan ....

(3) such plan is maintained solely for the purpose of complying with applicable workmen's compensation laws or unemployment compensation or disability insurance laws;

(4) such plan is maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens; or

(5) such plan is an excess benefit plan and is unfunded.

29 USC Sec. 1003(b)

15

“Governmental Plan”

Federal government (e.g., FEHBA, Tri-Care)

State & municipal government

Railroad Retirement Act

Indian tribal government

where substantially all work is in essential

governmental functions, not in commercial activities

29 USC Sec. 1002 (32)

16

“Church Plan”

“Church plan” is a plan maintained by an organization to provide employee benefits if such organization is controlled by or associated with a church.

“Employee of a church” includes an employee of an organization which is exempt from tax under section 501 of the IRC and which is controlled by or associated with a church.

29 USC Sec. 1002 (33)

May include hospitals, nursing homes, schools, colleges, etc.

17

ERISA PREEMPTION

EXPRESS PREEMPTION: ERISA

§514

COMPLETE PREEMPTION:

ERISA §502

18

ERISA § 514

(a) Preemption clause

[ERISA] shall supersede any and all State laws [that] relate to any employee benefit plan ...

(b)(A) Savings clause

[N]othing … shall be construed to exempt or relieve any person from any law of any State which regulates insurance, banking, or securities

(b)(B) Deemer clause

Neither an employee benefit plan ... nor any trust established under such a plan, shall be deemed to be an insurance company or other insurer, … or to be engaged in the business of insurance … for purposes of any law of any State purporting to regulate insurance.

19

FMC Corp. v. Holliday, 498 U.S. 52

(1990)

Insured plans indirectly regulated by state law regulating the plans’ insurers

Self-funded plans exempt from state insurance regulation; not altered by state law

What’s a self-funded plan?

Look at each plan component

Stop-loss insurance?

20

ERISA § 502: Civil enforcement

A civil action may be brought by:

502(a)(1)(B): a participant or beneficiary to recover benefits due under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify rights to future benefits under the terms of the plan;

502(a)(3): by a participant, beneficiary, or fiduciary (A) to enjoin any act or practice which violates any provision of this subchapter or the terms of the plan, or (B) to obtain other appropriate equitable relief (i) to redress such violations or (ii) to enforce any provisions of this subchapter or the terms of the plan

21

PLAN SUBROGATION &

REIMBURSEMENT RIGHTS

22

The Insured Plan

Most states have adopted anti-subrogation rules or doctrines precluding reimbursement

Extent of prohibitions varies state to state

MT constitutional protection

NJ prohibited as a function of collateral source statute

NY statute prohibits claims by insurers

PA presumes settlement is full recovery

Many states allow for contracting out of anti-subro doctrines

A few states have not adopted made-whole or other anti-subrogation law

23

The Self-Funded Plan

Form 5500 and Schedule A

Plan Document v. SPD

Cigna v. Amara, 563 U.S. ___, 131 S.Ct. 1866 (2011)

Subrogation v. Reimbursement

Interpreting the contract clause

Plan year and date of injury

Conditional language

Abrogating the made-whole doctrine

6th, 9th & 11th Circuits require explicit language

24

Actions Under ERISA 502(a)(3)

Federal jurisdiction is exclusive

Allows only “appropriate equitable relief” to

enforce plan terms

US Airways v. McCutchen, 133 S.Ct. 1537 (2013)

Unjust enrichment not a defense to plan contract term

“Background equitable rules” apply if not expressly

contradicted by contract term

Made-whole doctrine

Common-fund doctrine

25

“Appropriate equitable relief” 26

Montanile v. Bd. of Trustees, Nat’l. Elevator

Industry Health Benefit Plan, 577 U.S. ___ (2016)

Equitable claim and equitable relief

Equitable liens enforceable only against a specifically

identified fund in the defendant’s possession

Expenditure of identifiable fund on non-traceable items

destroys equitable lien.

What public policy is promoted?

What are the practical consequences?

Requesting Plan Documents

Request must be to Plan

Administrator/Sponsor

Statutory responsibility to provide within 30 days

$110/day civil penalty available for non-

compliance

29 U.S.C. § 1024(b)(4); 29 CFR § 2575.502c-3

27

What to request?

Plan Document (written instrument pursuant to 29 U.S.C. § 1102) in effect on date of injury;

Any document amending, supplementing, or otherwise modifying the Plan Document;

Summary Plan Description and employee benefits booklet in effect at the time of injury

All documents issued subsequently during any year in which benefits were paid

SPD Wrap Documents

Bargaining Agreement, Trust Agreement, Contract etc. under which Health Plan is established

Trust Agreement or other document establishing funding for the Plan

Annual Return/Report (IRS/DOL Form 5500), including all attached Financial Schedules

Administrative Services Agreement with any Third-Party Administrator for the Plan

An affidavit from the Plan Administrator attesting to self-funded status of the Plan

Complete statement of benefits paid to or on behalf of claimant/beneficiary

Specific plan component(s) paying benefits (e.g., health, dental, vision, AD&D, disability, etc.)

“Stop-loss” or excess/re-insurance coverage (insurer, policy numbers and attachment points)

28

Plan Document requirements

Named fiduciary/ies with authority to control and manage operation and administration of the plan

Procedure for establishing and carrying out a funding policy and method

Procedure for allocation of responsibilities for the operation and administration of the plan

Procedure for amending the plan, and for identifying persons who have authority to amend

Basis on which payments are made to and from the plan

29 USC § 1102 - ERISA § 402

29

SPD requirements

Name & type of administration of the plan

Any health insurer financing or administering the plan

Designated agent for service of legal process

Names, titles, and addresses of trustees

Relevant provisions of any collective bargaining agreement

Requirements for eligibility

Nonforfeitable pension benefits

Disqualification, ineligibility, or denial or loss of benefits

Source of financing and organizations providing benefits

Plan year (calendar, policy, or fiscal year) and end date;

Procedures for benefit claims and for redress of claims denied

29 USC 1022 - ERISA § 102

30

SPD or Plan Document?

CIGNA Corp. v. Amara, 563 U.S. 421, 438

(2011)

“[W]e conclude that the summary documents,

important as they are, provide communication with

beneficiaries about the plan, but that their

statements do not themselves constitute the terms

of the plan for purposes of § 502(a)(1)(B).”

31

Issues

Can SPD function as a § 402 Plan Document?

Can a Plan Document delegate authority to

claims administrator or SPD?

Do plan amendments affect

subro/reimbursement?

32

FEDERAL MEDICAL CARE

RECOVERY 33

FEDERAL MEDICAL CARE

RECOVERY ACT (FMCRA)

FMCRA provides the statutory authority for US

government subrogation claims against

tortfeasors

Includes:

Military personnel and dependents/survivors

Veterans and dependents/survivors

Any case in which the United States is authorized or

required by law to furnish or pay for hospital, medical,

surgical, or dental care and treatment.

34

42 U.S.C. § 2651 - Recovery by United States

“under circumstances creating a tort liability upon

some third person … the United States shall have

a right to recover … from said third person, or that

person’s insurer, the reasonable value of the care

and treatment … and shall, as to this right be

subrogated to any right or claim that the injured or

diseased person … has against such third

person.”

Statute creates no claim against a beneficiary.

35

Enforcement procedure: intervention or joinder The United States may

(1) intervene or join in any action brought by the injured person against the third person liable for the injury, or the insurance carrier or other entity responsible for medical expenses or lost pay; or

(2) Institute legal proceedings in state or federal court against the third person liable for the injury, or the insurance carrier or other entity responsible for medical expenses or lost pay, if an action has not been otherwise commenced within 6 months after care is first paid for by the United States.

42 U.S.C. § 2651(d)

36

Veterans Administration

Recovery by the United States of the cost of certain care and services.

38 U.S.C. § 1729(b)(1). The United States shall be subrogated to any right or claim that the veteran) may have against a third party.

38 U.S.C. § 1729(i)(3). ``Third party'' means-- (A) a State or political subdivision of a State; (B) an employer or an employer's insurance carrier; (C) an automobile accident reparations insurance carrier; or (D) a person obligated to provide, or to pay the expenses of, health services under a health-plan contract.

37

TriCare & CHAMPVA

TRICARE is a regionally managed health care program for active duty and retired members of the uniformed services, their families, and survivors.

CHAMPVA (Civilian Health and Medical Program of the Department of Veterans Affairs) is a healthcare program for spouses, dependent children or survivors of veterans, not otherwise eligible for TRICARE.

CHAMPVA is always the secondary payer to Medicare.

38

Collection from third-party payers The United States shall have the right to collect from a third-party

payer … to the extent that the person would be eligible to receive reimbursement or indemnification from the third-party payer … less the appropriate deductible or copayment amount.

“Third-party payer” means an entity that provides an insurance, medical service, or health plan … designed to provide coverage for expenses incurred by a beneficiary for health care services or products.

In cases of tort liability, collection from a third-party payer that is an auto liability insurance carrier is governed by FMCRA.

10 USC § 1095

39

FMCRA: No claim against

beneficiary

No claim against a beneficiary; statute restricts

claims to third parties liable in tort.

In re Dow Corning Corp., 280 F.3d 648 (6th Cir.

2002), cert. denied, 537 U.S. 816

Holbrook v. Anderson Corp., 996 F.2d 1339 (1st

Cr. 1993)

40

FMCRA: Made-Whole Rule

42 U.S.C. § 2652(c): No action taken by the

United States … shall operate to deny to the

injured person the recovery for that portion of

his damage not covered hereunder.

Statute requires that the injured party be made

whole before government may be reimbursed.

Government priority, or even pro rata

participation, is a denial of recovery.

Allen v. United States, 668 F.Supp. 1242 (W.D. Wis.

1987)

41

Franklin P. Solomon fsolomon@franklinsolomonlaw.com

42

A graduate of Rutgers University School of Law, Franklin Solomon’s nationwide practice is focused on evaluation, litigation and resolution of healthcare lien/reimbursement claims, representing personal injury victims and their attorneys in defending against claims by health plans and government benefits programs seeking payment out of tort recoveries.

ALLOWING TRIAL LAWYERS TO FOCUS ON WHAT THEY DO BEST®

EXPERTISE - RESULTS - PLAINTIFF ONLY PARTNER

THE SYNERGY DIFFERENCE

ERISA, MEDICARE ADVANTAGE, AND MEDICARE REFUNDS DAVE PLACE, J.D. VICE PRESIDENT, SYNERGY SETTLEMENT SERVICES DIRECTOR SYNERGY LIEN RESOLUTION SERVICES 46

Know Your Enemy

47

Rawlings 1,000 Acre Campus La Grange, Kentucky

Rawlings added 200 jobs to its already 1,200 employee strong workforce in 2016. Rawlings newest building expands its footprint to more than 250,000 square feet and includes a state-of-the-art training room for employees.

48

The Rawlings McCutchen Memo

49

ERISA governs employer-employee plans except where the employer is a government organization or a church organization.

– If the employer is the federal government, FEHBA applies.

– If the employer is the state government, State law applies.

– If the employer is a church, State law applies.

ERISA does not govern individual plans.

– Medicare, Medicaid, or state law applies to individual plans.

Is it ERISA?

50

Self-Funded ERISA pre-empts state law

– Funded by contributions from employer and employee

Fully insured ERISA subject to state law

– Funded by purchased insurance coverage

The Real Question – Funding Status

51

• 29 U.S.C §1024(b)(4) provides list of what the ERISA Plan Administrator must provide upon request. Copy of the latest updated Summary Plan Description (SPD) The latest annual report Any terminal report The bargaining agreement The trust agreement, contract, or other instruments under which the plan is

established or operated.

• Administrative Services Agreement was subject to the ERISA disclosure requirements as it is a document “that restrict[s] or govern[s] a plan's operation.” Shaver v. Operating Eng'rs Local 428 Pension Trust Fund, 332 F.3d 1198, 1202 (9th Cir. 2003), Hughes Salaried Retirees Action Comm. v. Administrator of the Hughes Non-Bargaining Retirement Plan, 72 F.3d 686, 690 (9th Cir. 1995); Grant v. Eaton, S.D. Miss, Civil Action No. 3:10CV164TSL-FKB; Fisher v. Metropolitan Life Ins. Co., 895 F.2d 1073, 1077 (5th Cir. 1990) Heffner v. Blue Cross and Blue Shield of Alabama, Inc., 443 F.3d 1330, 1343 (11th Cir. 2006).

Get What You Are Owed!

52

• 29 U.S.C §1024(b)(4) is a requirement placed upon the “Plan Administrator”.

• Named on administrative page in SPD. If not named then default is Plan Sponsor who will be employer or possibly a union.

• The Third Party Claims Administrator (TPA) is NOT the “Plan Administrator”.

• The recovery vendor or agent is NOT the “Plan Administrator”.

• Rawlings, Equian, Optum, Conduent, etc. will NEVER be the “Plan Administrator”.

• Optum has received your request for plan documents. It is our position that section 104(b) of ERISA [29 U.S.C. sec. 1024(b)] does not apply to Optum, since Optum is not the plan administrator. See, e.g., Nechis v. Oxford Health Plans, Inc., 421 F.3d 96, 104 (2d Cir. 2005). Nevertheless, without waiving any objections or defenses, and solely as an accommodation, we are enclosing copies of the following documents:

Ask the Correct Party

53

• Often the Plan Administrator is unsophisticated and relies on their TPA or recovery vendors to handle these matters.

• The TPA or recovery vendor may provide some of the required documents, but they almost never provide all that is required by 29 U.S.C §1024(b)(4).

• Documents supplied by bill collectors are entirely self-serving, and there is no penalty for providing misleading or inaccurate information to attorneys.

• Accept documents provided, most often the SPD and claims summary.

• The demand for documents itself is burdensome to the Plan Administrator, their TPA and recovery vendors. Do not let them off the hook.

• They have thirty (30) days to comply or face penalties.

Don’t Take Yes for an Answer!

54

• 29 U.S.C. § 1132(c)(1)(b) • Establish $100.00 per day penalty for failure to comply

• 29 CFR § 2575.502c-1 • Allows for this penalty to be increased to $110.00 per day

• Harris-Frye v. United of Omaha, (E.D. Tenn. Sept. 21, 2015) - Penalty $61,380.00

• Leister v. Dovetail, Inc., No. 05-2115, (C. Dis. Oct. 22, 2009) – Penalty $377,600.00

• Huss v. IBM Medical Plan, No. 07 C 7028, (N.D Dis. Ill. Nov. 4, 2009)–Penalty $11,440.00

• Law v. Ernst & Young, 956 F.2d 364, 375 (1st Cir. 1992)(affirming penalty of $100 per day)

• Gorini, 94 Fed. Appx. 913 (3rd Cir. 2004)(affirming an award totaling $160,780)

• Kollman v. Hewitt Assoc., 2005 WL 2746659 (E.D. Pa. 2005)($100 per day)

• Freitag v. Pan Am. World Airways, Inc., 702 F.Supp. 128, 132 (E.D. Vir. 1988)($100 per day)

• Tait v. Barbknecht & Tait Profit Sharing Plan, 997 F.Supp. 763 (N.D. Tex. 1998)($100 per day)

• Gatlin v. Nat. Healthcare Corp., 16 Fed. Appx. 283 (6th Cir. 2001)($100 per day)

• Kreuger Intl v. Blank, 225 F.3d 806, 811 (7th Cir. 2000)(affirming $100 per day)

• Brown v. Aventis Pharma., 342 F.3d 822, 825-826 (8th Cir. 2003)(affirming maximum penalty)

• Koegan v. Towers, Perrin, Forster & Crosby, 2003 WL 21058167 (D. Minn. 2003)($100 per day)

• Conger v. Univ. Marketing, Inc., 2000 WL 1818521 (D. Or. 2000)(($100 per day).

Track Penalties

55

McCutchen The “Common Fund” Argument

56

Scalia’s dissent to McCutchen references the fact that at a lower court level all the parties conceded that the Plan language addressed attorney fees. “In their brief in opposition to the petition they conceded that, under the contract, ‘a beneficiary is required to reimburse the Plan for any amounts it has paid out of any monies the beneficiary recovers from a third-party, without any contribution to attorney’s fees and expenses.” U.S. Airways v. McCutchen, 133 S.Ct. 1537(2013) Scalia’s dissent citing Brief in Opposition 5 (emphasis added); See Brief for Petitioner 18, and n. 6; Brief for Respondents 29; Brief for United State as Amicus Curiae 21.

U.S. Airways v. McCutchen - Dissent

57

“Under the common-fund doctrine ‘a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney’s fee from the fund as a whole.’ US Airways, Inc. v. McCutchen, 133 S. Ct. at 1551 (quoting Boeing Co. v. Van Gemert, 444 U.S. 472, 478 (1980)). ‘[I]f . . . injured persons could not charge legal costs against recoveries, people like [McCutchen] would in the future have every reason’ to make different judgments about bringing suit, ‘throwing on plans the burden and expense of collection.’ Accordingly, McCutchen is entitled to deduct his proportional fees and expenses that resulted in the recovery of the $10,000.00.

U.S. Airways v. McCutchen, Case 2:08-cv-01593-DSC (emphasis added) (W.D. PA. March 16, 2016).

U.S. Airways v. McCutchen - The Remand!

58

FEHBA Subrogation

59

• The Federal Employees Health Benefits Act (FEHBA) of 1959. 5 U.S.C. 8901 et seq.

• The largest employer-sponsored group health insurance program in the

world, covering more than 8 million Federal employees, retirees, former employees, and family members.

• Federal Employees Health Benefits Act Plans (FEHBA Plans) are contracts between the insurance carrier and the Office of Personnel Management (OPM)

• The language of a FEHBA plan preempts state law if it would differ the "nature or extent of coverage or benefits" offered under the FEHBA plan.

5 U.S.C. 8902(m)(1)

https://www.opm.gov/healthcare-insurance/healthcare/plan-information/plans/

FEHBA

60

• The Supreme Court declined to exercise subject matter jurisdiction, holding that Section 8902(m)(1) does not raise a federal question to support federal jurisdiction. The court noted it was undisputed that FEHBA did not expressly create a federal right of action.

Empire HealthChoice Assurance, Inc. v. McVeigh, 547 U.S. 677, 126 S. Ct. 2121 (2006)

• The Missouri Supreme held that that FEHBA does not preempt Missouri law which prohibits subrogation on personal injury claims

Nevils v. Group Health Plan, 418 S.W. 3d 451 (2014)

To what extent do FEHBA plans preempt state law?

61

• Coventry sought review in the United States Supreme Court after the Missouri Supreme Court ruled for Nevils, finding the FEHBA insufficiently specific to pre-empt Missouri’s anti-subrogation statute.

• At that point, OPM issued a regulatory interpretation of the statute stating explicitly that the subrogation provisions should apply notwithstanding contrary state law.

• The solicitor general weighed in with the suggestion that the Supreme Court vacate the decision of the Missouri Supreme Court and send the case back to let that court consider the new OPM regulation.

• The Supreme Court took the solicitor general’s advice, sending the case back to the Missouri Supreme Court in June of 2015.

• The Missouri court, though, stuck to its guns, holding once again that subrogation was inappropriate.

• This time around, the Supreme Court granted Coventry’s petition and set the case for full review.

• SCOTUS oral arguments heard March 1, 2017.

Nevils

62

QUESTIONS PRESENTED The Federal Employees Health Benefits Act (“FEHBA”), 5 U.S.C. § 8901 et seq., governs the health benefits of millions of federal workers and dependents, and authorizes the Office of Personnel Management (“OPM”) to enter into contracts with private insurance carriers to administer benefit plans. FEHBA expressly “preempt[s] any State or local law” that would prevent enforcement of “the terms of any contract” between OPM and a carrier which “relate to the nature, provision, or extent of coverage or benefits (including payments with respect to benefits).” Id. § 8902(m)(1). In a 2015 regulation, OPM codified its longstanding position that FEHBA-contract provisions requiring carriers to seek subrogation or reimbursement “relate to … benefits” and “payments with respect to benefits,” and therefore FEHBA preempts state laws that purport to prevent FEHBA insurance carriers from pursuing subrogation and reimbursement recoveries. 5 C.F.R. § 890.106(h). Expressly disagreeing with multiple federal circuits and state appellate courts, the Missouri Supreme Court nevertheless construed FEHBA not to preempt such state laws—explicitly refusing to accord any deference to OPM’s regulation. A majority of the court further concluded that Section 8902(m)(1) violates the Supremacy Clause of the U.S. Constitution. The questions presented are: 1. Whether FEHBA preempts state laws that prevent carriers from seeking subrogation or reimbursement pursuant to their FEHBA contracts. 2. Whether FEHBA’s express-preemption provision, 5 U.S.C. § 8902(m)(1), violates the Supremacy Clause.

Holding • “Contractual provisions for subrogation and reimbursement ‘relate to . . . payments with respect to benefits’

because subrogation and reimbursement rights yield just such payments. When a carrier exercises its right to either reimbursement or subrogation, it receives from either the beneficiary or a third party “payment” respecting the benefits the carrier had previously paid.”

• “The Federal Government, more-over, has a significant financial stake. OPM estimates that, in 2014 alone,

FEHBA ‘carriers were reimbursed by approximately $126 million in subrogation recoveries.’ 80 Fed. Reg. 29203. Such ‘recoveries translate to premium cost savings for the federal government and [FEHBA] enrollees.]’”

• “Many other federal statutes preempt state law in this way, leaving the context-specific scope of preemption to contractual terms [ERISA]… for example..”

Coventry Health Care of Missouri, Inc. V. Nevils

63

MAO Plans

• Medicare Advantage Plans, sometimes called “Part C” or “MAO,” are offered by private companies approved by Medicare. The MAO Plan provides all of Part A (Hospital Insurance) and Part B (Medical Insurance) coverage. MAO Plans may offer extra coverage, such as vision, hearing, dental, and/or health and wellness programs. Medicare pays a fixed amount for your care every month to the companies offering MAO Plans. These companies must follow rules set by Medicare.

• As Medicare Advantage plans are administered by private insurance companies many of the difficulties that dealing with BCRC or CMS can entail are avoided. Though these plans arguably have the same recovery rights as traditional Medicare, they are often much more open to agreements based upon equity and fairness

• MAO Plans use the Medicare Secondary Payer Act as their recovery vehicle.

Medicare Advantage

65

• Medicare Advantage Plans will use the same statutory formula to calculate their repayment as CMS (Centers for Medicare and Medicaid Services).

• C.F.R. 411.37(c): Medicare payments are less than the judgment or settlement. 1. Add (Attorney’s Fees) and (Costs) = Total Procurement Costs 2. (Total Procurement Costs) / (Gross Settlement Amount) = Ratio 3. Multiply (Lien Amount) by (Ratio) = Reduction Amount 4. (Lien Amount) - (Reduction Amount) = Medicare Demand

Amount

• C.F.R. 411.37(d): Medicare payments are equal to or exceed the judgment or settlement. 1. Add (Attorney’s Fees) and (Costs) = Total Procurement Costs 2. (Gross Settlement Amount) - (Total Procurement Costs) =

Medicare Demand Amount • Not all Medicare Advantage Plans agree that they are subject to

these reduction regulations. Rawlings advocates this position.

Medicare Advantage – Repayment Formula

66

• The Medicare Secondary Payer Act (MSP) provides for a private cause of action when a primary plan fails to reimburse a secondary plan for conditional payments it has made. “there is established a private cause of action for damages (which shall be in an amount double the amount otherwise provided) in the case of a primary plan which fails to provide for primary payment (or appropriate reimbursement) in accordance with paragraphs (1) and (2)(A).” - 42 U.S.C. § 1395y(b)(3)(A).

• 42 C.F.R. §422.108(f) extends the private cause of action to Medicare Advantage Plans. “MAOs will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under the MSP regulations in subparts B through D of part 411 of this chapter.”

• Additionally, CMS directors have issued memorandum asserting that: “notwithstanding recent court decisions, CMS maintains that the existing MSP regulations are legally valid and an integral part of Medicare Part C and D programs.” - CMS, HHS Memorandum: Medicare Secondary Payment Subrogation Rights (Dec. 5, 2011).

Medicare Advantage – Recovery Rights

67

• 42 U.S.C. § 1395y(b)(2)(B)(iii) “In order to recover payment made under this subchapter for an item or service, the United States may bring an action against any or all entities that are or were required or responsible … to make payment with respect to the same item or service … under a primary plan. The United States may … collect double damages against any such entity. In addition, the United States may recover under this clause from any entity that has received payment from a primary plan or from the proceeds of a primary plan’s payment to any entity.”

• 42 C.F.R. §411.24(g) “CMS has a right of action to recover its payments from any entity, including a beneficiary, provider, supplier, physician, attorney, State agency or private insurer that has received a primary payment.” – United States v. Weinberg, 2002 U.S. Dist. LEXIS 12289 (E.E. Pa. July 1,

2002). – United States v. Harris, 2009 U.S. Dist. LEXIS 23956 (N.D. W. Va.

March 26, 2009) affirmed, 334 F. App’x 569 (4th Cir. 2009). – Denekas v. Shalala, 943 F. Supp. 1073 (S.D. Iowa 1996).

Medicare Advantage – Attorney Liability

68

• In Humana Medical Plan, Inc. v. Western Heritage Ins. Co., No. 15-11436 (11th Cir. Aug. 8, 2016), the 11th Circuit Court of Appeals affirmed the U.S. District Court for the Southern District of Florida granting of Humana's Motion for Summary Judgment and held that Humana's right to reimbursement for the conditional payments it made on behalf of plan beneficiary under a Medicare Advantage Plan was enforceable. Additionally, Humana was entitled to double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A).

• Western Heritage had an obligation to independently reimburse Humana. Because it didn’t, the Court rule that as a matter of law, Humana is entitled to maintain a private cause of action for double damages pursuant to 42 U.S.C. § 1395y(b)(3)(A) and is therefore entitled to $38,310.82 in damages.

• The Eleventh Circuit said that placing the $19,155.41 in trust was not the same as paying the MAO and that the damages “SHALL” be double.

Medicare Advantage – All Eyes on Florida

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• Appeal

• Financial Hardship Waiver

• Compromise

• “Best Interest of the Program” Waiver

Medicare Conditional Payments Post Final Demand Options

70

• Current Success Rate: 84%

• Synergy has obtained: $3,496,746.70 in refunds back from Medicare since we began the service in 2013

• Average Refund is: $24,231.34

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Appeals

APPEAL LEVEL TIME LIMIT FOR FILING

REQUEST

MONETARY THRESHOLD TO

BE MET

I. Redetermination 120 days from date of receipt

of the notice initial

determination

None

2. Reconsideration 180 days from date of receipt

of the redetermination

None

3. Administrative Law Judge

(ALJ) Hearing 60 days from the date of

receipt of the

reconsideration

At least $130 remains in

controversy.

4. Departmental Appeals Board (DAB) Review/Appeals Council

60 days from the date of

receipt of the ALJ hearing

decision

None

5. Federal Court Review 60 days from date of receipt of

the Appeals Council decision or

declination of review by DAB

At least $1 ,260 remains in

controversy.

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• Involves application for a compromise or waiver to both the Benefits Coordination and Recovery Center (BCRC) as well as the Center for Medicare and Medicaid Services (CMS)

• There are three statutory authorities under which Medicare may accept less than the full amount of its claim: 1. §1870(c) of the Social Security Act – BCRC (Financial Hardship Waiver)

2. §1862(b) of the Social Security Act – CMS (Best Interest of the Program Wavier)

3. The Federal Claims Collection Act (FCCA) – done by CMS (Compromise)

• If successful, a refund is issued by Medicare

Post Payment of Final Demand Waiver/Compromise

73

• §1870(c) of the Social Security Act;

• Pay the Final Demand amount and then attempt to obtain a partial or full waiver.

• Waiver of recovery should not be requested until the case is settled and Medicare has issued a demand for repayment letter.

• Requests for waiver must be submitted in writing

• Medicare may grant a full or partial waiver if recovery would negatively affect the beneficiary's standard of living compared to how it was before the accident/injury/illness.

Financial Hardship Waiver

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“There shall be no recovery if such recovery would defeat the purposes of this chapter or would be against equity and good conscience.”

• The Medicare Secondary Payer Manual does provide example

situations of financial hardship that would justify a full or partial waiver consideration.

• “The beneficiary has spent the settlement proceeds and the only remaining income from which the beneficiary could attempt to satisfy Medicare’s claim would be from the money that is needed for the beneficiary’s monthly living expenses;

• Beneficiary income and resources are at a poverty level standard

• An unforeseen severe financial circumstance- For example, waiver would be appropriate if the beneficiary became legally responsible for their grandchildren.”

Financial Hardship Waiver

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• A Medicare beneficiary seeking a waiver or compromise of Medicare’s interest is required to submit a Hardship Letter to CMS for use in their evaluation process. Whenever possible this letter should be written by the beneficiary. The letter needs to express to CMS why repaying Medicare the amount of their Final Demand is “against equity and good conscience” and has/will create(d) an “undue hardship.”

1. Facts of Accident 2. Injuries – Physical, psychological, emotional 3. Current Physical, Mental, Emotional state 4. Unrecorded out of pocket expense

a) House Renovation b) Adult diapers c) Prescriptions d) Private nurse or custodial care not paid by Medicare e) Co-insurance and deductible f) Accident related dental work g) Other financial obligations

5. Status of settlement proceeds. Exhausted? 6. Unforeseen financial circumstances---ex. become legally responsible for

grandchildren. 7. Degree to which repayment would cause undue hardship 8. Reason why repayment is not justified.

Hardship Letter

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• The Federal Claims Collection Act (FCCA) • CMS may suspend or end collection action on a claim

when it appears that no person liable on the claim has the present or prospective ability to pay a significant amount of the claim or the cost of collecting the claim is likely to be more than the amount recovered.

• The cost of collection does not justify the enforced collection of the full amount of the claim;

• There is an inability to pay within a reasonable time on the part of the individual against whom the claim is made; or

• The chances of successful litigation are questionable, making it advisable to seek a compromise settlement.”

Post-Settlement Compromise

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• § 1862(b) of the Social Security Act;

• A separate and distinct evaluation than a request under §1870(c) of the Social Security Act (Financial Hardship Wavier) and a request for a Compromise under the Federal Claims Collection Act (FCCA)

• The Secretary may waive (in whole or in part) the provisions of this subparagraph in the case of an individual claim if the Secretary determines that the waiver is in the best interests of the program established under this title

“Best Interest of the Program” Waiver

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Fighting the Good Fight Pays Off!

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Dave L. Place, J.D. Vice President, Director of Synergy Lien Resolution Services dave@synergysettlements.com 407-279-4811

THANK YOU

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