ERISA Liens

When small companies provide health insurance to their employees, they buy it from large insurers, like Blue Cross Blue Shield of Illinois (“BCBSIL”), on their employees’ behalf. When they do so, they are paying for not only the costs of the services provided (BCBSIL paying for medical bills), but also BCBSIL’s profit and overhead (employee salaries, office building rent, utilities, etc.). These additional costs result in higher prices to the consumer. In contrast, rather than buy insurance from BCBSIL like small companies, very large companies (e.g., Walmart, Chrysler, etc.) try to provide health insurance for cheaper by acting as their own health insurer for their employees and just paying BCBSIL (or another company) a smaller fee to administer the program. If you are an employee of a large company, even though you might have a health insurance card with BCBSIL’s name on it, the money used to pay your doctor’s bills might actually come from your company. The purpose of having BCBSIL’s name on the card is to make your health insurance card more universally acceptable.

Very large employers also have a lot of political power. Accordingly, in 1974, Congress passed Employment Retirement Income Security Act of 1974 (“ERISA”). One of the many provisions it requires is that, in the event an employee is injured in a car accident (or suffers any other injury where the employee has the right to sue) and the employer pays the employee’s medical bills, the employer is entitled to be reimbursed 100% of what it paid for the medical bills. That is not a problem if the person who caused the injury is well insured (i.e. if it the at-fault driver was working for a company or the government). However, it becomes a big problem if the at-fault party is underinsured (e.g. a poor person buying state-minimum coverage) or if the recovery is reduced because the employee is partially at fault. If the large employer pays out $50,000 in medical bills and the employee only recovers $25,000, then ERISA says that the large employer gets reimbursed the entire $25,000 even if it means the employee and even the attorney who obtained the $25,000 get nothing. As you might imagine, attorneys get very upset when this situation arises: we spend hours and hours of hard work and thousands of dollars of our own money to obtain compensation for a wronged client only to see some very large company come in and claim it all. Not only does the attorney suffer a substantial loss on the case, but it becomes our job to explain the problem to the client. Clients love blaming the messenger.

With that said, we have our ways of pushing back, of course, which I won’t publish to the world here. But the problem remains. If you are employed by a large company, when choosing an attorney, make sure he or she is familiar with how to handle an ERISA lien.

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