Compliance July 5, 2004

HMO Subrogation Claims Stay in Federal Court

May 31, 2002 (PLANSPONSOR.com) - Workers belonging to ERISA-governed HMO plans can't file state-court lawsuits against their health maintenance organizations over rules that participants repay their health-care costs from money won in separate personal-injury claims, a federal judge ruled.
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US District Judge Jerome Simandle of the District of New Jersey ruled that because the participants’ claims related to administration of their company health plans, ERISA would bar them from litigating separately about the repayment requirement – legally referred to as a subrogation provision. The participants sought to have the repayment requirements thrown out.

In his ruling, Simandle noted that ERISA doesn’t typically bar state lawsuits over the quality of health care but often preempts claims about the health-care quantity of services.

Background

The case involves six consolidated complaints brought by HMO participants against their health plans.

The HMO defendants included:

  • Aetna U.S. Healthcare
  • United Healthcare Corp.
  • Health Net of the Northeast
  • Oxford Health Plans
  • Horizon Blue Cross/Blue Shield of New Jersey.

After getting money from their personal-injury claims, the participants repaid the plans for medical expenses that plans had already covered. The participants then went to New Jersey state court to get the money back.

Lawyers for the participants claimed that enforcement of the HMO repayment rule amounted to unjust enrichment for the HMOs and got the cases moved to federal court where ERISA suits are normally dealt with

When the issue reached Simandle, he ruled that the participants were actually disputing the amount of benefits they were due under their company plans.

“Defendants argue, and this Court agrees, that plaintiffs’ present claims are actually claims for benefits under the ERISA plans,” Simandle wrote. “Essentially plaintiffs seek to regain the whole benefit provided to them by defendants, including those amounts paid in subrogation pursuant to the terms of the plans.”

Simandle cautioned the parties that his ruling was only intended to settle the question of which court – state or federal – should hear the claim. His decision did not apply to whether the HMO repayment rules were enforceable.

The ruling is Carducci v. Aetna U.S. Healthcare, D. N.J., No. 01-4675 (JBS), 5/28/02.

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