A recent U.S. Supreme Court decision in an ERISA case has provided injured workers with more protections against their health plans if they are injured and go to court to recover for lost wages, medical expenses, and pain and suffering. In its decision in the Montanile case, the Supreme Court ruled 8-1 that ERISA-governed plans cannot seize an individual’s general assets to pay themselves back for medical expenses the plan initially paid on behalf of the individual. Generally, plans may claim some or all of a settlement or court award as reimbursement for money spent by the plan on an individual’s medical care. This ruling, however, limits a plan’s ability to recoup the money spent by the plan on an individual had received in the settlement, or goods that could be traced to it. The ruling may improve consumers’ odds of retaining a larger portion of their settlement or jury award by prompting health plans to negotiate with an injured worker early to agree on how to divvy up a settlement or jury award in a way that’s fair to both sides.
The case also has important implications for pension plans which try to recover over-payments from retirees. This case will make it more difficult for pension plans to recover benefits that were paid to a retiree as a lump sum, but which the retiree has sued up to pay normal and ordinary costs of living. A retiree with very limited assets will probably be protected against a plan’s efforts to recoup the over-payment. If the overpaid money has been used to pay living expenses and not used to obtain any assets there would be no asset or identifiable fund that the plan could legally claim.
For a discussion of this case, see: