When dealing with healthcare liens the first line of defense from the plaintiff’s perspective is the “made whole” rule. This is the doctrine that the healthcare provider is not entitled to any reimbursement unless the injured plaintiff is fully compensated by the tort recovery for all of their economic and non-economic damages, i.e. “made whole.”
In Georgia, this is an especially valuable protection because, unlike many states, it is codified in Georgia law at O.C.G.A. § 33-24-56.1. This statute applies to any health insurer, HMO, PPO, disability plan, lost wage provider or any other healthcare provider providing insurance to an individual or group.
Essentially, the statute says that the healthcare providers are not entitled to reimbursement from the plaintiff’s proceeds unless the injured party was “fully compensated” by the recovery. This is calculated by subtracting the amount of the reimbursement sought from the total recovery, as well as the attorney’s fees and case expenses which the plaintiff pays to their attorney. If what is left over for the plaintiff is less than the value of their damages, then the client was not “fully compensated” and there is no right to reimbursement.
Obviously, it is very difficult for a plaintiff to be made whole under these circumstances, so reimbursement rarely applies absent a windfall recovery for the plaintiff. So plaintiff attorneys need to use this statute to protect their client’s recovery proceeds whenever possible.
From the plaintiff’s perspective this statute is too good to be true right? Well, unfortunately it is. Not all health insurance is subject to this protection.
The vast-majority of health insurance in this country is provided by private employers and the majority of those plans are regulated by Federal law, known as the Employee Retirement Income and Security Act (ERISA). Sadly for the plaintiff, the federal regulations affecting these plans pre-empt state law.
So if you are dealing with an ERISA plan, state law O.C.G.A. § 33-24-56.1 will not apply.
However, all is not lost for the plaintiff treating with an ERISA plan. The 11th Circuit recognizes an equitable doctrine of “made whole” that exists in the case law separate from state statutes like O.C.G.A. § 33-24-56.1. In fact, the 11th Circuit has held that the made whole doctrine is the default rule when analyzing healthcare reimbursement, unless there is “clear and unambiguous language” in the plan that rejects the rule. Cagle v. Bruner, 112 F.3d 1510, 1522 (11th Cir.
1997). See also Adelstein v. Unicare, 31 Fed. Appx. 935 (11th Cir. 2002) and Summerlin v. Georgia-Pacific, 366 F.Supp.2d 1203 (M.D. Ga. 2005) for more explanation by the Court of when the “made whole” rule applies or does not apply to rights of reimbursement claimed by ERISA plans.
The problem with this equitable rule is that most healthcare plans written in this country take great care to do just that — they draft language that clearly rejects the rule.
Nevertheless a careful practitioner must look at the plan documents to determine whether a rejection of “made whole” is clearly stated in the plan. Usually, the language will be there and you can bet it will be clear and unambiguous. But if the language is missing from the plan documents the Plaintiff has the law on their side if they choose to fight the healthcare plan’s claim for reimbursement.
Finally, there is the most important consideration when dealing with employer provided insurance: it may not be an ERISA plan after all. Not all employer-based healthcare plans are regulated by ERISA. The most common exception are healthcare plans funded by insurance, not the employer, which often provide the same benefits to multiple employers in a group. This is often referred to as a “multiple-employer plan,” or “fully insured plan.” You most often see this type of insurance when dealing with small businesses.
That is another reason it is vital to obtain the plan documents before agreeing to pay the plan. In my experience, healthcare plans and their third-party collection agencies dont’ just come out and say they are “not ERISA” and “we have no right to reimbursement.” Some due diligence is often needed to determine how the plan is funded and arranged. Again, the only way to determine that is by requesting and reviewing the plan documents.