Insurance Law – Erisa Subrogation Liens

By: Donna Russo, Esq.

Employee health insurance plans are governed by federal law known as “ERISA”.  It is typical for these policies to contain a provision that requires repayment from a personal injury settlement for health benefits paid to treat the injuries sustained in the accident.  Many times, insurance companies use a third party to collect the lien.

In Aetna, Inc. Aetna Health, Inc, (a NJ corp.), Aetna Health Insurance Co., Aetna Life Insurance Co., and the Rawlings Company, LLC,, (Civil No. 13-1377 3/1/16), Judge Hillman of the NJ District Court held that challenges to the lien amount must first be made through the administrative process under the insurance plan as ERISA requires exhaustion of the plan’s review and appeal process.  The Court held that a subrogation lien are in fact claims for “benefits due” citing Wirth v. Aetna US Healthcare, 469 F.3d 305, 309 (3rd Cir.2006) and Levine United Healthcare Corp., 402 F.3d 156, 159-60 (3rd Cir. 2005).

Exhaustion of the administrative remedies may be excused on futility grounds weighing the following factors: (1) whether plaintiff diligently pursued administrative relief; (2) whether plaintiff acted reasonable in seeking immediate judicial review under the circumstances; (3) existence of a fixed policy denying benefits; (4) failure of the insurance company to comply with its own internal administrative procedures; and (5) testimony of the plan administrators that any administrative appeal was futile.

The court held that the Rawlings’ letters ( third party lien collector) that stated that the subrogation/reimbursement demand would not change does not satisfy the futility test.