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High Court ruling forcing PI lawsuit winners to pay employers

Did a 2006 U.S. Supreme Court decision make it easier for employers who provide health benefits to take a cut of their employees’ damages awards from personal injury verdicts?

Yes, according to a report in today’s Wall Street Journal (hat tip to the ABA Journal), which reports that since the Court’s decision last year in Sereboff v. Mid Atlantic Medical Services, Inc. [PDF file], employers who pay health benefits to employees who are injured have been much more aggressive in pursuing subrogation claims against the employees after they win personal injury verdicts or settlements.

Employers say that the practice is necessary to ensure that medical expenses are not paid twice, and to protect against giving some employees cash windfalls at the expense of other employees and the employer, who would otherwise bear the cost burden.

But plaintiffs say the practice is cruel and leaves some injured employees unable to make ends meet.

From the article [sub. req’d]:

Such recoveries represent a tempting savings for insurers, employers and union-administered plans. The American Benefits Council and America’s Health Insurance Plans, the health-insurer lobby, estimate health plans recoup some $1 billion a year in medical claims from accident settlements and other third parties. . . .

Until recently, employers and insurers generally didn’t go after small claims. But more-sophisticated claims tracking has made it easier. Recovery companies systematically search claims for certain medical codes — say, a sprained ankle or head trauma — that flag a potential accident. Claims examiners then mail a questionnaire and often follow up with calls. If the injured person confirms it was an accident, the firm tracks whether the patient files an injury suit.

If there is a lawsuit settlement, employers may seek to recoup money they paid for medical expenses. In many cases, it’s relatively cut and dried: Often medical expenses are just a portion of the overall damages award, or the accident victim’s attorney reaches a compromise with the health plan ahead of any settlement.

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