Employers grab accident victims' cash

Some plans are taking a further step, refusing to pay claims in the first place unless the person filing the claim signs an additional form promising to reimburse the plan from settlement proceeds.

Don Burgett, a Texan who works as an engineer on an oil-drilling ship, has been waiting for his health plan to pay $89,000 in medical claims since his daughter's accident two years ago. Magan Burgett, then 18, was thrown from the back of an all-terrain vehicle in October 2005, tearing her liver, breaking her jaw and fracturing her back.

Soon after Magan's parents submitted the bills for her two-week stay in an intensive-care unit, her father's health plan, the MEBA Medical and Benefits Plan of Maryland, mailed him a reimbursement agreement that restated the plan's rights to a potential settlement.

"To consider claims related to your accident," it said, Don Burgett had to sign it first. When he didn't, MEBA stopped paying claims after reimbursing several hundred dollars in Magan's medical expenses.

Neal Korval, MEBA's outside counsel, says that asking a plan member to sign a reimbursement agreement in such cases is standard procedure and a policy outlined in its health-plan rules. It helps prevent accident victims and their attorneys from trying to "freeze out" the plan from a potential settlement, he says, and reminds or advises the plan member of his or her obligations.

In September, the U.S. District Court for the Eastern District of Texas sided with the Burgetts, ruling that MEBA's health-plan summary, which it considered the prevailing document, didn't stipulate such conditions to pay a claim. The Burgetts' attorney says they secured a $75,000 accident settlement -- a net of $50,000 after legal expenses -- though that wasn't enough to cover Magan's medical expenses. Korval says MEBA recently reached a settlement with the family over the unpaid medical claims, but he declined to disclose terms.

Pivotal court rulings

How much power health plans have to enforce subrogation is based on a hodgepodge of federal and state laws still being tackled in the courts. A pivotal Supreme Court ruling last year gave health plans a leg up. In that case, a Maryland couple, Joel and Marlene Sereboff, were injured in an accident while returning a rental car to an airport in 2000; they required $75,000 in medical care. The couple later received a settlement of $750,000 from various parties related to the accident.

Mid Atlantic Medical Services, now owned by UnitedHealth Group, administered the health plan of Marlene Sereboff's employer and sued the couple when they refused to pay the company out of their settlement.

In a unanimous decision, the court upheld that Mid Atlantic had the right to enforce its claim, in large part because it could point to the settlement money set aside in an easily identifiable fund. The couple had placed the money in a separate account when the issue went to court. The decision has made it easier for plans to go after settlements, legal experts say.

Few such cases have attracted as much attention in legal circles as the Shanks'. Deborah Shank took a job in 1999 stocking shelves at a Wal-Mart store in Cape Girardieu, Mo. She jumped at the shift from 11 p.m. to 6 a.m. so she could spend days at home with her three sons, Jim Shank says. After a probationary period, she qualified for benefits under the Wal-Mart health plan in February 2000.

One day about three months later, as she and a friend were touring local yard sales, a tractor-trailer plowed into the driver's side of her minivan. Her friend's injuries were minor, but Deborah suffered major brain trauma and spent the next several weeks in intensive care. She drifted in and out of a coma, and a hospital, for months.

"One doctor didn't give her any chance," says Jim Shank, a maintenance worker at Southeast Missouri State University. Her medical bills climbed past $460,000. The health plan paid them promptly. "They were terrific in that respect," he says.

Wal-Mart's health plan also sent him several notices that he was to inform it before he settled any suit. In 2002, the Shanks did sue and won a settlement from Gem Transportation, the owner of the truck. The firm had only $1 million in liability coverage, though. For his own losses, Jim Shank received $200,000, of which $119,000 remained after legal expenses. He says he spent most of it toward a one-story house fitted with ramps and wider doors, which is more accessible than the family's previous three-level home.

Deborah Shank's own settlement was $700,000. After legal expenses and attorney fees, the remaining $417,477 was placed in a court-created trust designed specifically for her future care. The Shanks' lawyer, Maurice Graham, wrote the Wal-Mart health plan informing them. Deborah had received no funds directly, he said, and therefore had nothing to pay Wal-Mart back.

Continued: A decent quality of life

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