Health plan can stop coverage to recoup money without going to court – Reuters

A wrangler holds a saddle horn outside Three Forks, Montana, May 6, 2012. REUTERS/Jim Urquhart
(Reuters) – An animal-wrangler’s health plan can stop covering his family’s medical expenses to offset its lien on a $100,000 tort settlement that his older daughter received but has long since spent, a federal appeals court held.
The 9th U.S. Circuit Court of Appeals reversed Monday a win for Normal Mull, his wife, and their younger daughter, and sent the case back to the lower court in Los Angeles with instructions to enter judgment for the Motion Picture Industry Health Plan (MPI).
While federal law limited MPI’s right to sue the Mulls, it did not stop the plan from including out-of-court “self-help” remedies negotiated with the employees’ union, enforcing those remedies, or raising them as defenses against the Mulls’ lawsuit, Circuit Judge Richard Clifton wrote for the panel. He was joined by Circuit Judges Milan Smith Jr. and Paul Watford.
Attorneys for both sides did not immediately respond to requests for comment.
According to the district court and 9th Circuit, Mull’s oldest daughter, Lenai, was an adult college student who was badly injured in a 2010 automobile accident.
MPI paid $148,000 for her medical treatment, but only after Mull and his daughter granted them a lien against any settlement or insurance proceeds.
Lenai Mull settled with the responsible driver for $100,000, which the driver’s insurance company paid her. She refused MPI’s demand for reimbursement, spent the money, and filed for bankruptcy protection.
Under the U.S. Supreme Court’s interpretation of ERISA, the federal law governing employer-provided health plans, MPI could not sue the Mulls once the settlement had been “dissipated.”
Instead, MPI turned to the plan’s self-help provision: rather than paying subsequent claims by the family, MPI determined the covered amount and applied it against the debt.
The Mulls filed suit in 2012, arguing that the self-help provision was an unconscionable and illegal end-run around ERISA’s limitations on suit. The district court initially ruled for the Mulls on other grounds, but the 9th Circuit reversed in 2017.
The Mulls prevailed again on remand, and the 9th Circuit reversed again on Monday.
While it found no other appellate cases dealing with out-of-court recoupments of a third-party tort settlement, the panel said “numerous courts, including this one, have upheld self-help remedies similar to the one in this case” – specifically, the right to withhold long-term disability benefits to recoup amounts the claimant received from Social Security disability insurance or workers’ compensation.
The case is Danielle Mull, guardian ad litem for Carson Mull, et al., v. Motion Picture Industry Health Plan et al, 9th U.S. Circuit Court of Appeals, No. 20-56315.
For the Mulls: Donald de Camara; Daniel Wilcoxen and Drew Widders of Wilcoxen Callaham
For MPI Health Plan: Kathryn Halford and Elizabeth Rosenfeld of Wohlner Kaplon Cutler Halford Rosenfeld & Levy
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